What’s driving PH property sector?

Manufacturing resurgence is driving demand for industrial space.

It has probably become an opt repeated news by now: that the Philippine property sector is well poised to sustain the stellar performance it has seen in recent years.

There seems to be no stopping the growth of real estate and consequently, its related industries, as current and expected developments support this optimistic forecast.

Foremost of these developments would be the Duterte administration’s thrust to aggressively ramp up infrastructure spending up to 2022. Other factors—such as the ongoing manufacturing resurgence and tourism growth—are also coming into play at what seems to be a most opportune time for the property sector.

Here are some of the factors seen to have a favorable impact on the property sector, according to Colliers International Philippines.

1 Golden age of infrastructure

In a flash report dated January 27, Colliers said the more than 60 projects that the Duterte administration has committed to implement over the next five years will pave the way for a “golden age of infrastructure” in the country.

“The government’s thrust to intensify infrastructure development bodes well for the long-term growth of the economy and this should trickle down to various sectors including real estate,” explained Joey Roi Bondoc, research manager at Colliers International Philippines.

These projects ranged from roads to railway systems and bus rapid transits, which are expected to ease access to major township projects in Metro Manila and in key areas outside of the country’s capital.

Bondoc said the expansion of the city’s railway system should “unlock underutilized areas for township developments, while the construction and expansion of roads within Metro Manila will help connect the business centers of Makati, Pasay, Ortigas, and Taguig.”

The development of rail projects in Northern, Central, and Southern Luzon should support the expansion of manufacturing in these regions.

2 Manufacturing resurgence

Another bright spot for the property sector would be the resurgence of the manufacturing sector, which has been driving demand for industrial space.

Over the medium term, Bondoc said they see the sustained flow of investments. As such, property firms are encouraged “to develop industrial estates in alternative hubs where infrastructure support is accessible such as Pampanga, Bataan, and Bulacan.”

“The Philippines will benefit from the construction of infrastructure projects under the public private partnership scheme and the sustained surge in manufacturing investments from Japan, China, and Taiwan as foreign manufacturers take advantage of the country’s trade deals with Asean and European Union,” he said.

3 Strong consumer spending

Household spending, which accounted for 70 percent of the Philippine economy, increased by 6.9 percent—outpacing local economic growth of 6.8 percent.

According to Bondoc, this indicated that personal consumption spending continued to lift the overall growth of the economy. This can be attributed to the increase in remittances sent by the overseas Filipino workers, low inflation and interest rates, and further improvement of the country’s employment situation.

In turn, this strong consumer spending would bode well for the retail segment.

“In Metro Manila alone, an estimated 500,000 sqm of leasable space is projected to be constructed in 2017. These establishments… are indicative of the Metro Manila residents’ growing disposable incomes,” Bondoc said.

4 Continued BPO growth

The growth of the BPO industry trickles down to a number of sectors including real estate. More specifically, any expansion boosts demand for office, retail spaces, and worker accommodation facilities.

According to Bondoc, the continued demand for office space will be supported by strong pre-leasing from BPOs, knowledge process outsourcing firms and offshore gaming companies.

It was estimated that 80,000 sqm of office space were taken by offshore gaming firms last year. In the last quarter, there was a surge in inquiries, with each offshore gaming firm looking at a minimum of 10,000 sqm of space.

Bondoc also cited the need for developers to look into worker accommodation projects for young professionals.

The market for these projects include call center employees who can’t afford to have their own apartment or rent a condo unit within established central business districts such as Makati, Fort Bonifacio, and Ortigas Center.

5 Rising tourist arrivals

The rising tourist arrivals is expected to spur the development of resorts, hotels and restaurants, leisure areas, and even meetings, incentives, conferences, and exhibitions facilities.

According to Bondoc, major international events should entice more foreigners to visit the Philippines. These include the concluded Miss Universe event, Madrid Fusion, Asean Transport Ministers’ Meeting, Hotel Show Dubai, and the Asean Summit 2017.

“Major hotels in Makati, Fort Bonifacio, and Pasay Bay Area should benefit from these events,” Bondoc said.

He further noted that hotels’ occupancy rates are expected to rise with the completion of the proposed P74.56-billion Ninoy Aquino International Airport Development Project, which covered the upgrade of all four terminals of the country’s main airport.

The modernization of the regional airports in Davao, Bacolod, Iloilo, Cagayan de Oro, and Bohol, once completed, would open enormous economic opportunities to the five urban areas. The expected surge in commercial activities is likewise seen to propel the demand for accommodation and MICE facilities in the said five areas.