REIT to further buoy property post-COVID-19

In my previous columns on real estate investment trust (REIT), I mentioned that the successful launch of REITs in the Philippines bodes well for the property market and the Philippine economy in general.

For one, it is likely to attract more foreign investments into the country. It also places the Philippines at par with other Asian economies that have fully developed capital and real estate markets. At the same time, REITs should stoke the construction sector, which has significant multiplier effects to the economy. This should help the Philippine economy rebound postpandemic.

Colliers believes the REIT implementation in the Philippines will likewise result in the further differentiation and innovation of property development projects, which should eventually benefit Filipino investors and end-users.

Opportunities

National developers meanwhile should be on the lookout for opportunities offered by the government’s ambitious infrastructure development plans and explore possible public-private partnership (PPP) projects that cover hospitals and schools. It should be noted that aside from traditional asset classes such as offices, malls and warehouses, other segments of the economy are likely to benefit from the launch of REITs in the Philippines.

Property firms should likewise be on the watch for the proposed relaxation of foreign ownership cap in crucial economic sectors such as construction and retail. In our opinion, easing of foreign ownership restrictions in these sectors should contribute to an attractive REIT sector in the Philippines beyond 2021.

Recommendations

Colliers Philippines has highlighted a few recommendations on how provincial and national property firms can maximize the launch of REITs in the Philippines.

Use REITs as a benchmark for valuing assets. The Philippine property market is quite opaque with actual market information not readily available. Thus, disclosure of values through REIT transactions should enhance transparency in the property sector moving forward, benefiting all market participants.

Consider priming assets for REIT listing. This is particularly important for mid-tier developers that intend to raise funds by selling assets to major developers in the future. In our opinion, smaller players should consider refurbishing their offices and malls within and outside Metro Manila.

Maximize the opportunity presented by co-living and flexible workspace sectors, which may be included in REITs. These asset classes are likely to become more attractive especially once the property market sentiment starts to recover. Note that these segments will help sustain the viability of business districts postpandemic.

Use REIT proceeds to develop integrated communities in key cities outside Manila. Colliers believes that among the more attractive locations are Metro Clark in Pampanga, Iloilo, Cebu, Bacolod, Cavite, Laguna, Batangas and Davao. This should support national developers’ goal of expanding their marketwide footprints outside of Metro Manila.

Attractive REIT properties

Colliers believes that developers also need to upgrade their warehouses continuously to keep up with the needs of logistics tenants. Industrial assets are attractive REIT properties and should also be included in developers’ REIT portfolio. The demand for modern logistics facilities has been growing on the back of a thriving e-commerce and a lockdown economy that is projected to rebound at a much faster pace beyond 2021.

We remain optimistic with REIT launches in the Philippines. REITs are primarily supported by the office sector, which is one of the segments likely to propel the Philippine property segment’s growth beyond 2021.