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The Philippine Property Market 2019

Title: Philippines Real Estate Market Outlook in 2019: A Complete Overview

Author: Marcus Sohlberg in Property Markets & News | Date posted: October 16, 2018

Highlights:

How will Philippines’s real estate market perform in 2019?

Overall, Philippines’ real estate market looks bright for 2019, especially if we look at places like Metro Manilla. The demand is outpacing the supply in almost all major cities, while the office vacancy rate is less than 5%.

Based on recent figures, as well as previous trends, many believe that Manila might be one of the best locations to invest in real estate in Southeast Asia.

There are few countries in the world that had a growth rate of 6-7% in the last decade. The rapidly growing economy is driving the real estate sector, with increasingly more Chinese investors and companies operating in the Philippines.

We also see an increased purchasing power among locals.

The offshore gaming industry is one of the key drivers of the real estate market, both in the office and residential sector. In 2018, the gross gaming revenue increased by 9.4%, which represents a flourishing industry backed by Chinese investors and gaming companies.

Is Philippines’ real estate market at its peak?

In fair terms, no. You might wonder if the continuous price increases, that we’ve seen for the last seven years, means that the market has already reached its peak.

This is probably not the case, at least if you look back at the time of the Asian Financial Crisis in 1997.

At that time, the property market went through a sharp decline. But if you compare the current prices adjusted by inflation, the current prices are still 20% lower. Looking historically, the market is still far from its historic peak.

How high are the rental yields in the Philippines?

Even if prices are expected to rise at the same rate as in the last few years (8~10%), the rental yields are expected to remain at a similar level. Philippines performs well in terms of rental yields, so it’s nothing you should worry about too much.

In 2017 and 2018, we didn’t see a big increase in rents for residential properties, and Colliers predicts a 1-3% increase in rents by 2020, at most.

Future supply of property in the Philippines

According to a recent report published by JLL, many well-known developers operate in Metro Manila and other NCR cities to provide office and residential space, meeting the coming demand.

According to JLL, around 2.1 million square meters of office space will be added until 2020, where a majority will be dedicated to Makati, Pasig, and Taguig.

Similarly, the same report predicts an increase of 35,000 condominium units in 2019. Cities like Pasay, Taguig, Makati, and Quezon are expected to see the highest increase in residential units.

8.600 condominium units will be provided quarterly from 2019 to 2021, while the condominium vacancy rate will remain at around 12-13% during this time period.

The increase in rents will stay the same with only a marginal increase until 2021.

What is driving the demand of real estate in the Philippines?

I’ve mentioned some of the reasons why we see an increased demand of real estate in the Philippines. Below I’ve listed additional information, speaking for an increased demand:

Offshore companies and outsourcing from China

With the continuous depreciation of the Peso, Philippines become more affordable and a lucrative market for foreign companies to take advantage of its big English speaking workforce.

There’s an increased demand from global e-commerce companies, call centers, and gaming firms, among others.

Note: 1 USD = 49 Pesos in Jan 2018 | One USD = 54 Pesos in Oct 2018

Continuous supply of flexible workspace

With millions of square meters of office space the rents remain stable, allowing companies and startups to expand and operate more easily.

Increased number of local and foreign high net-worth individuals

A stronger economy, a lower unemployment rate, a growing middle-and upper class, and foreigners drive the growth of the residential property market.

Increased amount of Chinese buyers

An increased number of Chinese buyers contributes to the current and future growth. According to Bloomberg, the gambling/gaming market has attracted around 100,000 Chinese workers to the Metro Manila area since September 2016.

High remittances from overseas

Philippines is the third largest recipient of foreign remittances in the world. Overseas Filipinos sent additionally USD 3 billion to their families in 2017 compared to 2016.

With a depreciating peso, and with the increase in foreign remittance, many families now have the purchasing power to buy and invest in the residential property market.

Summary

According to market statistics, previous trends, reports by leading real estate agencies like Colliers and JLL, Philippines remains an attractive spot for real estate investments in 2019.

Prices are increasing, the demand is high, and the market is growing with a sustainable pace, which is predicted to remain the same for the coming two to three years.

The key drivers are: increased interest from foreign companies (that need housing for their employees), Chinese investors, an increased purchasing power among locals, and increasingly more remittance of money from overseas.

Yields are comparatively high and it’s generally easy to do business. You also have the option to apply for a number of long-term visas, allowing you to stay indefinitely, with low requirements.

It’s always hard to predict the future, but with the information on hand, it seems like Philippines will perform fairly well in 2019.

View full article HERE.


Title: What’s in store for PH real estate sector in 2019

Author: Amy R. Remo for the Philippine Daily Inquirer | Date posted: December 22, 2018

Highlights:

“For the Philippine property market in 2019, flexibility will be the name of the game,” Colliers Philippines stressed.

“The strong demand and evolving preference of tenants is giving rise to flexible workspaces; residential developers are tweaking their projects to cater to Chinese offshore gaming employees and local professionals; and mall operators are more open to foreign food and beverage (F&B) and home furnishing tenants, which we see redefining retail space absorption in 2019. Developers are also cashing in on the thriving property market by aggressively acquiring parcels of land outside of the more established business districts,” it explained.

Here, according to Colliers, are the top 10 highlights that will define the Philippine property landscape in 2019.

1.  Infrastructure-led government spending to spur property

Colliers said it expects the government’s plan of frontloading infrastructure projects dictating the strategies of developers in and outside Metro Manila. Hence, it also sees a more pronounced dispersal of office and residential developments outside Manila in 2019.

“Colliers believes that property firms will be more aggressive in acquiring parcels of land in Northern and Southern Luzon and ensure that they are strategically positioned, especially in Pampanga, Bulacan, Cavite, Laguna and Batangas. Developers’ expansions should be supported by the completion of rail, expressway and toll road projects between 2020 and 2022 that are planned to pass through these provinces,” it said.

2. Metro Manila office vacancy to remain at sub-6 percent

Colliers said it is expecting Manila office vacancy to hover around 5 percent by end-2018.

“We see strong demand being carried over to 2019, with projected demand to move in step with the new supply. Over the next 12 months, Colliers sees the delivery of nearly 1 million sqm of new office space and take up of about 910,000 sqm. This should yield a vacancy of 5.4 percent by end-2019. About 30 percent of office space due to be delivered in 2019 is already about 30 percent pre-leased,” it said.

The knowledge process outsourcing (KPO) sector—which provide higher value outsourcing services such as health information management, software engineering, and finance and accounting—is seen to drive office demand in the next 12 months. Such demand is boosted by the presence of top technology firms in the country such as Google, and the improvement in Metro Manila’s ranking in the latest Tholons global outsourcing survey.

3. Offshore gaming to expand outside Manila

For 2019, Colliers sees offshore gaming firms occupying 200,000 sqm to 300,000 sqm of office space, representing as much as 23 percent of the projected take-up in 2019.

“We encourage new and expanding offshore gaming companies to continue looking for space in Cebu, Pampanga and Laguna where bulk of large space is still available,” it said.

“Aside from expansive office space and residential availability, offshore gaming companies need to operate in cities that have airports offering direct flights to China or areas that have direct access to and from Manila. This is one of the reasons why these firms are starting to look at a number of cities in Southern Luzon,” it added.

4. Flexible workspaces to grow by 10 percent annually

The tight Metro Manila office market—coupled with the emergence of a mobile workforce and firms’ drive to bring down operating costs —has given rise to another office sub-segment: the flexible workspace.

“We see Manila’s flexible workspace stock expanding by at least 10 percent per annum over the next three years on the back of continued rise of micro, small and medium enterprises ; influx of multinational corporations and outsourcing firms looking for plug-and-play offices; and the implementation of a set of policy reforms likely to improve the country’s business climate,” Colliers forecasted.

“Over the next three years, we expect more flexible workspaces to be offered in malls, hotels, residential towers and dormitories for professionals,” it added.

5. Manila Bay area to dominate Metro Manila condo price, supply

In the third quarter of 2018, the Bay Area overtook Ortigas Center as the third largest submarket in terms of condominium stock, with 200 more residential units available compared to Ortigas Center.

In 2019, Colliers said it sees the completion of more than 6,000 new condominium units in the Bay Area out of the projected 15,000 new units. It also expects Bay Area to overtake other submarkets such as Makati central business district by 2021.

6.  Luxury residential market to remain strong, price to breach P400,000 per sqm

Colliers expects the luxury condominium demand to remain strong as Metro Manila continues to have one of the most attractive rental yields in the region, relatively low prices and sustained demand from affluent Filipinos, foreign investors and offshore gaming firms.

The luxury market in the country’s capital is relatively small but demand has been stable over the past few years. The projects being leased out or sold to the secondary market continue to receive strong demand.

Pent-up demand also encourages mid-income condominium developers to scale up and construct high-end projects in emerging business districts such as the Manila Bay Area. One luxury project that will be built along Ayala Avenue in Makati is expected to breach the P400,000-per-sqm price point.

7. F&B to further dominate retail absorption

Colliers believes that the food and beverage (F&B) segment will remain the major driver of retail space absorption in Metro Manila over the next 12 months. This can be attributed to continued inflow of remittances from overseas Filipino workers and rising disposable incomes, coupled with a stable macro-economic backdrop.

A number of foreign F&B brands such as Popeye’s, Panda Express and Shake Shack are reportedly opening branches in Manila over the next 12 months and are seen to contribute to greater retail space absorption across the country’s capital.

8.  More foreign players in home furnishing, luxury retail in the Bay

Colliers said it sees sustained demand for home furnishings given the increasing popularity of condominium living in Metro Manila. Nearly 60 percent of projects launched in the third quarter of 2018 are studio and one-bedroom units.

It pointed out that prices of pre-sale condominiums in the reclaimed business district have been rising by about 30 to 80 percent since being launched early last year. This, according to Colliers, is indicative of the spending profile of tourists and foreign investors in the area.

“Colliers believes that the Bay Area is ripe for more high-end F&B, footwear and clothing brands. Prada, Givenchy and Salvatore Ferragamo have opened shops in Solaire casino. The area continues to attract high-end retailers and we see more luxury brands opening shop in the reclaimed business district over the next 12 months,” it said. “The completion of new malls in the Bay Area such as Aseana mall is an opportunity for operators to house luxury retailers.”

9. More strategic land banking, township development in QC

The groundbreaking for the Manila subway, the most expensive project approved by the government, is planned in December 2018, with the first three stations in Quezon City—Mindanao Avenue, Tandang Sora and North Avenue—due to be completed in 2022.

“Colliers sees Quezon City benefiting from the planned subway as seven of the 13 stations are planned within the city. With improving connectivity given the construction of the Manila Subway, MRT-7 and the common LRT-MRT station, we see Quezon City becoming more attractive for mixed-use projects that feature office, residential and retail projects,” it said.

10.  Upgraded infrastructure to spur Cebu leisure

Aside from the modernized and expanded airport, Colliers said it sees Cebu’s tourism sector growing due to a number of infrastructure projects which should open new opportunities in the countryside. The completion of these projects should spur demand for more hotels and serviced apartments outside the Metro Cebu (which comprises Cebu City, Lapu-Lapu and Mandaue) corridor.

Over the next 12 months, Colliers expects property firms to take a more aggressive approach in exploring parcels of developable land especially in the Mandaue and Mactan areas, which are seen as highly viable for resort-oriented townships.

View full article HERE.


Title: The Outlook of the Philippine Real Estate Industry in 2019

Date posted: January 11, 2019

Highlights:

OUTLOOK FOR 2019

Forecasts on the office sector remain positive for 2019. On the supply side, a large volume of office space is anticipated to be added this year while on the demand side, office occupancy from BPO, online gaming, and flexible workspace firms show optimistic outlook with pre-commitments on office buildings in the pipeline. Rents are foreseen to have an upward trajectory due to healthy leasing demand and continued investor interest will prop up capital values of office developments.

The residential sector is predicted to thrive in 2019 due to the strong demand for upper-mid to luxury segments with developments’ pre-sold units ranging from 80% to 100%. The residential leasing market in Makati and BGC is also expected to benefit from the spillover effect of healthy demand for office spaces from BPO and online gaming firms.

The sound macroeconomic environment of the Philippines is likely to support the retail market in 2019, with retailers taking advantage of the rising disposable income of Filipinos. The relaxation of the Trade Liberalization Act of the Philippines may increase foreign investments coming to the Philippines because of the lower paid-up capital requirement. The government’s discussions on the actualization of the Real Estate Investment Trust (REIT) law may also encourage more investment in the retail market.

The hospitality sector will sustain its robust performance in 2019. Foreign hotel operators are likely to enter the Philippine market and form partnerships with local developers. The government’s continuing support of the tourism industry evidenced by its infrastructure push to improve the accessibility of tourist destinations is forecast to have a positive effect on tourism in 2019 thereby enabling growth in the hospitality sector.

2019 will be a year that further showcases the emergence of new trends and opportunities in the Philippine real estate industry. The cultural shift led by the millennial generation to a community-based lifestyle will drive the popularity of co-working and co-living in the Philippines. The increasing demand for co-working spaces will encourage more foreign flexible space operators to increase their presence in 2019.

Flexible space operators like WeWork and IWG have extended their footprint in the country and are expected to expand in 2019. More local providers of co-working and co-living spaces are also expected to emerge, typically operating in fringe areas. The lower capital costs these types of assets require will spark investor interest.

Logistics is another asset type that is expected to thrive in 2019. The emergence of e-commerce firms will support the logistics sector as shipment and transportation of merchandise will be needed. Lazada and Zalora, for example, have greatly expanded their operations in the Philippines that will benefit the logistics sector.

Foreign and local government policies will, undoubtedly, affect the real estate industry in 2019. The US-China trade war, for example, has created a huge opportunity for the Philippine property market as China is looking at spaces/lands in other countries because of tariffs imposed by the US. The Build, Build, Build (BBB) policy of the Philippine government has spurred investment activity in areas such as Clark City and the province of Pampanga where the BBB projects like the expansion of Clark International Airport, The Subic Cargo Railway, etc. are in the pipeline. The government’s infrastructure push also creates a spillover effect to surrounding provinces. The TRAIN 2 (Trabaho) and the REIT law, once implemented, will affect the property industry in 2019 as well.

JLL says the outlook for the Philippine real estate industry in 2019 remains positive. The demand for real estate space by the BPO sector as well as increasing demand from emerging real estate stakeholders like technology companies and flexible space operators will continue to make significant inroads into the Philippines’ property market in 2019. This expected growth and expansion of the industry in 2019 will hopefully encourage investments in the next wave cities of Davao, Cebu, Clark, Cagayan de Oro, Iloilo, and Bacolod.  As such, 2019 is anticipated to be another solid year for the Philippine real estate industry.  Barring any hitches from the upcoming 2019 elections, apprehensions over the implications of TRAIN 2, and the delay in PEZA accreditations on buildings, the year 2020 already looks just as promising.

View full article HERE


Title: Real-estate leadership on the year that was and 2019

Author: Amor Maclang for Business Mirror | Date Posted: October 24, 2018

Highlights:

PRESENTING A RECAP OF THE YEAR THAT WAS AND PROSPECTS FOR 2019
ERIC MANUEL, ARCH CAPITAL, PHILIPPINES, ASIAN INSTITUTE OF MANAGEMENT
WHAT WAS THE DEFINING TREND IN REAL ESTATE LAST YEAR?

The combination of technological and demographic trends has led to developers and occupiers implementing flexibility in their overall real-estate strategies. The coworking trend is just the beginning of something much more disruptive.

WHAT DO YOU SEE HAPPENING FOR NEXT YEAR? 2019?

Companies will have to master agility, the ability to think, understand and move quickly. Business models must change, with technology at the center, to adapt to new demands and unpredictable macroeconomic forces. The agile companies will win top talent, market share and investor funds.

2018 saw the continuing rise of mixed-use developments in various parts of the country—truly a reflection of the growing urban migration.

“For 2019, I’m expecting more innovative mixed-use developments to launch in 2019. Also, expect to see more attention to landscape in the newer projects.”

CHRIS NARCISO, ARTHALAND AND SHDA MEMBER BOARD OF GOVERNORS AND PAST NATIONAL PRESIDENT

Record breaking by the end of 2018, the Philippine real-estate market would have broken many records. Largest amount of new supply, largest amount of take up, most number of emerging business districts and new townships, highest capital prices for land, condo units, etc. The record that we’re happiest about, though, is the highest ever number of registered and certified green buildings under credible green building rating tools like Berde (our national voluntary green building rating tool, BerdeOnLine.org) The market is embracing sustainability more and more with every passing year.

2019 is shaping up to be a year of volatility and uncertainty. However, we still forecast 2019 to be a banner year in terms of green building and sustainability given the level of commitment from many of the developers in their ongoing and planned projects. Also, we have successfully established this year that basic green building certification (under Berde) is achievable at zero construction cost premium (excluding actual certification cost), which will be a huge growth driver in greening more of our real-estate industry.

RAYMOND RUFINO, CHAIRMAN, PHILIPPINE GREEN BUILDING COUNCIL

2018 has merely been an appetizer as we are eyeing for year 2019! In 2018, we got a greater taste for coworking and liked the flavor. We enjoyed the continued foreign direct investments from predominantly China. Business-process outsourcing  growth is no longer progressive. The government’s “Build, Build, Build” boosted prices, but also appreciated the value of foreign currencies, thus making foreign remittances from overseas Filipino workers and foreign investors even more enticing for senders and recipients alike.

The millennials, start-ups and SMEs are largely behind the growth in coworking like a new grassroot movement. Overall, it’s likewise the multinationals that continue to seek flexible rather than conventional workspace. In 2019, we’ll not see any new office buildings without the element of flexible working. The speed of change is simply too rapid solely to rely on conventional office space. Besides, the employees are more productive with flexible working and easier to attract and retain.

The supply of new commercial office space has been record-high in 2018 with over 1.2 million square meters of office space turned over. While this rate is expected to continue in 2019, the question is whether the demand will remain as strong as currently is the case. 2019 has greater uncertainties than we faced when entering 2018. Should the BPO sector diminish, or the global economy slow down, the real-estate sector may go from boom to gloom.

Nevertheless, 2018 has been merely an appetizer, and 2019 is when all the trends will take a giant grip in the market. Moving from commercial square meters as a commodity to work spaces shaped for community building, knowledge sharing and flexibility. How big the overall demand will become is the real question.

LARS WITTIG, COUNTRY MANAGER, PHILIPPINES-VIETNAM-CAMBODIA, REGUS & SPACES BY IWG

2018 saw the growing of partnerships and collaboration to develop land, often while addressing the challenges of urbanization like creative housing solutions and decongestion from Metro Manila.

2019 may see more urgent property integration with infrastructure to capture transit-oriented development value as major connectivity gets within horizon. A need and will to step up regional competitiveness.

SYLVESTER WONG, VICE PRESIDENT, ASIA/BUILDINGS & PLACES-PHILIPPINES ASIA/SEA, AECOM

“Developers are increasingly planning and designing their buildings to help their tenants achieve their business objectives, especially on talent retention. As a commercial office developer, we have designed green office buildings that can help employees be healthier and more productive, and incorporated retail choices and coworking spaces to enrich their time in the office. We ensure that the office is accessible, close to major infrastructure, as well as located in a community where employees can have a work-life balance.

We believe this trend will continue to the succeeding years as developers cater more to the well-being of their tenants. We also find this as an opportunity for businesses to expand outside the established business districts and closer to upcoming infrastructure projects that can bring about greater connectivity.”

View full article HERE.


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