The real estate market will continue to benefit from the country’s sustained economic growth this year, but project delays related to the tight labor supply in the construction sector will remain a key challenge, property consulting firm Colliers Philippines said.
In a yearend research note, Colliers sees the Philippine economy growing by between 6 and 6.5 percent annually over the next three years as macroeconomic fundamentals remain sound and the contribution of investments and manufacturing to national economic output continues to expand.
Public construction is seen to be a major source of growth given the government’s pledge to ramp up infrastructure spending throughout the country. Colliers also expects private construction to continuously grow, citing sustained appetite for office and retail developments while outsourcing and tourism-related activities are seen to continue driving the services sector.
And amid concerns over the potential decline in business process outsourcing (BPO) demand due to President Duterte’s anti-US rhetoric, Colliers believes BPOs will continue to drive the office market. The consulting firm cited a recent forum where Mr. Duterte advised BPO stakeholders to “forget your fears” when asked whether there’s reason to be wary of the government’s investment policies.
The information technology-BPO industry is projected to grow by a compounded annual rate of 8 percent between now through 2022, with a shift to higher value services and provincial locations envisioned to drive growth.
Colliers considers Cebu, Bacolod, Iloilo, Pampanga and Davao as the most viable alternative locations for growth given such as factors as available talent pool and local government support.
Meanwhile, one key risk cited by Colliers for the coming year remains the dwindling supply of skilled labor in the construction sector.
“At the beginning of 2016, the projected supply of new office space was close to 900,000 square meters. This has been adjusted downwards by more than 30 percent due to project delays related to the tight labor supply in the construction sector,” the research note said.
Citing BCI Economics’ latest report, Colliers noted that the number of new construction projects in the fourth quarter of 2016 was expected to increase by more than 1,000 percent from the previous quarter, with construction starts in the residential segment alone projected to grow by 1,264 percent within the same period.
“With the projected surge in new developments, there will be further pressure on contractors to complete their projects in light of the already insufficient labor pool,” the research said.
Colliers noted that some retail projects due to be completed in the fourth quarter of 2016 had also been pushed back due to tight labor supply.
“Top general contractors are already declining to provide their company profiles to prospective clients due to a shortage of adequately skilled workers,” Colliers said.