Outlook for PH property sector remains bright | Inquirer Business

Outlook for PH property sector remains bright

By: - Reporter / @amyremoINQ
/ 04:06 AM December 07, 2019

Outlook for PH property sector remains brightAn unprecedented stellar growth. An extended property curve. An extended bull run.

Such are the oft-repeated sentiments on the performance of the Philippine real estate industry, owing to its uncurtailed growth as seen for almost a decade now.

This is all thanks to the country’s robust economic performance, steady remittance flows from overseas Filipino workers (OFWs) and the consumers’ stronger purchasing power, among other factors, which have fueled growth across all property segments, while paving the way for the emergence of new ones.


Industry experts polled by the Inquirer all agreed that 2020 may similarly yield an exciting landscape for property developers given the new emerging trends that would further fuel sustainable growth that will be seen and felt not only in Metro Manila and key urban centers, but also in the countryside, specifically in secondary and tertiary cities where developers have started to explore for possible projects.


Beyond the profit prospect, the property developers’ expansion plans, particularly in the provinces are helping stimulate economic activities and uplift the quality of lives of people.

But there’s no room for complacency. Amid the positive outlook, some experts are urging developers to remain cautious just the same, prepare a war chest, and craft well-planned, ingenious strategies that would ease the potentially adverse impact of possible headwinds, including uncertainties in the fiscal regime, increasingly cutthroat competition, regulatory roadblocks, among other challenges.

Here are the views—analysis and forecasts—of three esteemed industry experts, who are shedding light on what had transpired in 2019 and what is expected of the dynamic Philippine real estate industry in 2020.

Sustained growth seen

The Philippine real estate sector continues to follow the upward trajectory of the country’s economic growth. The country’s macroeconomic pillars, including OFW remittances and business process outsourcing (BPO) revenues, continue to boost the property sector.

The government has yet to factor in the full economic impact of Philippine offshore gaming operators (Pogos) but we already see this segment boosting Philippine property, especially the office and residential sectors. Some BPOs are on wait-and-see due to tax reform uncertainty but some traditional occupants such as engineering, construction and flexible workspace operators are continuously looking for office space across Metro Manila.

The demand for condominium remains robust, but for 2019, the take up is threatened by slower launches, due partly to the shortage of skilled manpower in the construction sector.


The retail segment meanwhile remains active and we project the completion of about a million sqm of new leasable space in the next three years with developers trying to control vacancy by housing lifestyle-oriented and non-traditional tenants such as flexible workspace operators.

In the industrial sector, we saw a sustained absorption of industrial land and warehouses in Southern Luzon but concerns on rationalization of fiscal incentives are likely to affect expansion plans. We see interest from Chinese manufacturers and tourists, compelling developers to tap opportunities by building the first Philippine-Sino industrial park and opening hotels for the Chinese market.

Lowest office vacancies

With stable macroeconomic background, it is no longer surprising to see the country recording one of the lowest office vacancy rates in the region; one of the largest office space take up; and its new office supply at par with office space completion in the region.

Colliers has observed that both landlords and BPO tenants have started looking for expansion sites outside Metro Manila. Colliers believes that among the feasible hubs for BPOs are Cebu, Pampanga, Iloilo, and Davao. Hence, we encourage outsourcing tenants to explore the viability of these locations.

Uncertainties in fiscal regime

Concerns regarding uncertainty of the government’s tax reform program continued to stall the expansion plans of tenants in the outsourcing industry. The sector’s growth prospects are further weighed down by the government’s imposition of a ban on the approval of economic zone applications in Metro Manila.

For the entire year, we see the completion of 1 million sqm of new supply and total take up of nearly 900,000 sqm.

By the end of 2021, Colliers sees Metro Manila’s leasable office stock reaching 14.1 million sqm. This is 28 percent higher than the metro’s stock of 10.9 million sqm at the end of 2018.


Residential take up remains robust, buoyed by OFW remittances and rise in spending power. The mid-income category (condominium and house and lot units priced from P3.2 million to P6 million) remains as the most attractive segment in the market.

The growing interest from foreign investors and developers has been instrumental in raising prices in the market. Joint venture projects with foreign firms are among the more expensive in the market, but take up is strong. Colliers sees these partnerships thriving as foreign companies are enticed by sustained yields.

We project condominium stock to reach 128,500 units by the end of 2019, higher than our earlier forecast of 128,050 units. Metro Manila’s stock should expand to 152,000 units by end 2021, a 28 percent rise from about 118,900 in 2018.

Extended bull run

While Metro Manila office’s demand drivers remain diversified, Pogos continue to outpace others in terms of share to total leasing transactions. Pogos now occupy about 10 percent of total leasable office space in Metro Manila or 1.14 million sqm. They also occupy spaces in Cebu, Clark, and Laguna. We see strong absorption of office space in these areas over the next two to three years.

Catch up public spending

Colliers believes that the completion of infrastructure projects in key cities outside Metro Manila should stimulate redevelopment of areas and drive an uptick in office and residential supply in these areas.

Co-living, student-centric

Developers should tap pent-up demand for the co-living segment. We see a more pronounced development of these projects and developers should start incorporating differentiating features such as childcare facilities, cooking areas and private lounges that can be used for business functions.

Based on our survey, about 45 percent of Makati CBD employees commuting from other parts of Metro Manila are willing to stay in a co-living facility near the business district. While spending P2,000 to P4,500 a month for transportation, employees are willing to shell out more (P6,000 per bed a month) to stay in a co-living facility.

College students in Metro Manila are not spared from the worsening traffic. Aside from the mom-and-pop dormitories, the need for condominium projects near universities is also rising.

Filling retail vacancy

Colliers sees more mall openings over the next three years. In fact, we project the completion of more than 300,000 sqm of leasable retail space a year over the next three years. Mall developers continue to open new malls and expand existing ones as they capture Filipinos’ rising purchasing power, backed by holiday-induced spending and sustained remittances from OFWs.

One opportunity for mall developers to fill vacancies is to tap flexible workspace operators. A research by Colliers USA said flexible workspaces can drive consumer traffic and consequently, boost spending in the shops and restaurants.

Chinese market

While total foreign arrivals are growing by 10 to 15 percent a year from 2016 to 2018, the number of Chinese tourists has been increasing by about 37 percent a year during the same period. Over the next 12 months, we see Chinese tourists driving the hospitality sector and contributing to higher hotel occupancy and spending. Colliers thus recommends the development of more three- and four-star hotels in key locations including Clark, Cebu, and Davao.

REIT implementation

In our opinion, now is the most opportune time to launch REITs as the Philippine property market has been on an upswing. To best take advantage of REITs, Colliers urges developers to consider divesting their properties into REITs to access a cheaper source of capital; use REIT proceeds to renovate and reposition assets such as offices, malls and warehouses, as well as develop integrated communities in key cities outside Manila; and set aside a portion of REIT proceeds to acquire reclaimed properties in Manila.


Some developers, however, have been slowing down in terms of residential launches due to acute shortage of skilled manpower in the market, which is exacerbated by the government’s infrastructure push.

As a result, this might hamper the development of masterplanned communities in key business hubs outside Metro Manila. The government’s failure to usher in the Golden Age of Infrastructure before President Duterte steps down is likely to affect the expansion strategies of developers especially those planning to maximize transit-oriented developments.

This year, real estate investment coupled with infrastructure spending grew enormously. Private capital flooded the market, ramping up developments in practically all asset classes. As a real estate analyst and educator for more than 30 years, there are three major factors that drove rapid growth in the country in 2019.

Growth drivers

Firstly, we can look at the macro environmental factors including environment, social demographics, technological and regulatory. Population growth coupled with OFW remittances and the natural migration of rural dwellers to mega and other progressive cities boosted urban real estate considerably.

The housing backlog of more than 6 million houses that no administration has cured over the past 30 years continues to hound the sector. On the flipside, this lack of sectoral support by housing leaders continue to challenge developer groups like Chamber of Real Estate and Builders’ Associations (Creba), Subdivision and Housing Developers Association Inc. (SHDA), and Organization of Socialized and Economic Housing Developers of the Philippines Inc (OSHDP) in singlehandedly exhorting their members to build housing communities.

Secondly, we have political platforms like the Pogo and the Build, Build, Build programs initiated by the government. Undoubtedly, the single biggest industry that contributed to the strong push in 2019 is the Pogo. The burgeoning industry has created a spike in property prices near gaming sites and a windfall for developers.

Pogo is one of the main growth drivers why real estate values have gone up. In just two years, an estimated P20 billion in rent from Pogo-related activities directly benefited office, residential and retail sectors.

The third factor that has made the sector resilient are mostly developer initiatives purely driven by growth and profit. Other growth drivers include the perennially growing remittances from OFWs and rising domestic tourism receipts. These drivers coupled with sta

Softening of the market

The Philippine real estate market is on an extended property curve but definitely no bull run anymore. As a cautionary note, it is best to manage expectations because the softening of the market is inevitable.

My belief is that any event that will disrupt the market is usually unpredictable in terms of timing or severity. It cannot also be anticipated or preempted as it is part of any economic cycle.

Personally, barring any major global upheaval, we can expect a fairly soft landing. Why? Our essential structures are relatively strong and I am referring to our highly regulated lending institutions. Therefore, any adjustment in real estate price points in selected areas will just be more of a fundamental calibration.

Also crucial to the continued growth of real estate would be easy access to credit that could bring more qualified buyers and stricter lending regulations.

Replicating Build, Build, Build

I am convinced that the housing plan initiated by previous administrations was an epic failure. But one major centerpiece program that can boost 55 allied industries associated with real estate is the Build, Build, Build program if replicated in the mass housing space.

In his last two and a half years in power, President Duterte should muster its resources and re-energize all housing agencies in full partnership with private developers so they can collectively commit to the construction of 2 million houses all over the country.

Trends for 2020

New savvy investors, expansions in more cities, tourism, exciting products and technology will intensify competition. Next year, the real estate market can expect the arrival of new investors that may help transform the property landscape.

There will be more collaboration with the industry’s counterparts in the Asean region and new joint venture deals for horizontal and vertical developments including world class hotels and resorts.

Technological innovation and new concepts will also reinvigorate the industry and further raise the bar anew among local property developers with the introduction of compelling and innovative projects. We can also expect more green projects plus the bandwagon effect wherein property developers will expand in the provinces.

Preparing for the worst

There are, however, several challenges, but I want to address a primary but predictable event that also involves lending institutions and the regulators.

Are we constantly monitoring credit cycles? Historical data have shown that any financial event follows credit expansions. It is also similar in patterns of expectations, with enthusiasm about housing and cheap money supporting the credit boom.

Unfortunately, having a low interest rate regime can also pose danger. When there is cheap money circulating, expect speculators and unqualified buyers to disrupt the financing ecosystem. When they default in multiples of thousands, we will have a huge problem.

The next challenge is a question that most players in the region would ask me. Is the industry at its peak? Are current price points at an all-time high? Is inventory down? Are multiple offers common, even above asking price? Is there overbuilding?

A word of advice to developers with limited capital funding: Prepare a war chest, have a solid game plan, hire very good professionals and create a compelling value. The old way of doing things is no longer working. The industry is fraught with uncertainties and competition will be intense. A game plan is your best friend.

Despite the economic slowdown in the first nine months of 2019, the Philippine real estate industry, particularly the office market, remained resilient and vibrant due to robust transactions from offshore gaming firms, and traditional offices.

According to Pronove Tai, the Metro Manila office market is poised for a record setting demand at 1.25 million sqm in actual leasing transactions by the end of 2019. The offshore gaming sector is projected to top the office demand with 37 percent share, followed by traditional offices and BPOs firms.

Metro Manila is expected to register a healthy vacancy level of 5 percent in 2019 despite high supply completions at 1.1 million sqm, while office stock is expected to grow by 10 percent year on year from 10.6 million sqm to 11.7 million sqm in 2019.

Positive outlook

This positive outlook will continue at least for the office market until mid-2022 due to strong economic growth, offshore gaming firms and the Metro Manila office market’s high supply and strong demand.

Improved bilateral relations of Philippines and China also contributed to the strong influx of Chinese investments in the country in the last three years. For this reason, the offshore gaming firms dominated by mainland Chinese became a major demand driver in the office market, which spilled over to the residential and retail market. To date, offshore gaming firms have occupied over 1.2 million sqm of office space nationwide.

In the next three years, Chinese investments will continue particularly in the gaming industry, tourism, and infrastructure projects. As long as President Duterte’s administration maintains its friendly stance with China, offshore gaming firms will continue to contribute to the economy.

In the next three years, the office market is expected to deliver approximately 870,000 sqm of completions annually. This is 40 percent higher than the annual average of 620,000 sqm in the last 10 years. We project the demand to reach 900,000 sqm in terms of of leasing transactions per year.

Attracting investments

Several developments may define the real estate sector next year. For one, the Securities of Exchange Commission is finalizing the implementing rules for REIT Law, which we hope will be released in 2020. The full implementation of the REIT Law will definitely attract more investments in the property sector.

REITs are seen to boost the capital markets, and encourage both local and foreign investors to earn passive income and long-term capital appreciation. REITs will also release more capital for more urban and sub-urban developments.

Developers should thus identify new projects to develop in the provinces to assist the government in decongesting Metro Manila and identify high value assets that need more funding for renovation and redevelopment.


Offshore gaming is expected to expand outside Metro Manila, paving the way for more economic and sub-urban real estate activities in cities including Clark, Cebu, Davao, Iloilo and Bacolod. Real estate companies should put up more mixed used developments that will cater to the needs of foreign workers in offshore gaming such as housing, retail establishments, and recreational facilities.

Infra build-up

The ongoing construction of big-ticket infrastructure projects will benefit land owners with the expected increase in property values. These include the Metro Manila Subway, Makati Subway, and LRT extension project. Developers should thus proceed with their landbanking activities particularly in land near such infrastructure projects in Quezon City, Taguig City, Makati City, Pasig City and Bacoor, Cavite province.

Chinese market

Chinese housing occupiers are seen to drive up rental rates and capital values, which will sustain strong demand in mid-to-luxury condominium developments. The downside, however, is that this market will cause a spike in rents and prices of property near Metro Manila office districts, while the first-time Filipino homebuyers are forced to buy their property in nearby provinces of Cavite, Laguna, Bulacan and Rizal.

Developers should absorb Chinese tenants to maximize higher yield opportunities while putting up more co-living spaces for professionals wanting to live near office districts. Real estate firms should likewise develop affordable housing in the provinces.

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.


The sustained robust growth of e-commerce and logistics is seen to boost the industrial warehousing facilities particularly in the areas near seaports, airports, expressways, and railways. Developers should renovate or redevelop their existing warehousing facilities to meet the demand of tech-savvy e-commerce and logistic companies.

TAGS: Inquirer Property, property sector

© Copyright 1997-2024 INQUIRER.net | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.