More Real Estate Investors Manila

Philippine Daily Inquirer By Raquel Gomez, 05-28-2014

MANILA now ranks as the fourth most preferred city for real estate investors in the Asia Pacific, outperforming Singapore, Hong Kong, and Sydney, according to property outlook report by real estate services firm KMC MAG Group.

The report cites the Urban Land Institute's 2014 regional findings on real estate trends.

Overall, KMC MAG Group reported the local real estate market still continues to be robust across all property sectors. This trend parallels that of the Philippines' economic growth.

The country's strong economic fun­damentals have continued to create a favorable investment climate, despite external shocks such as natural disasters like Super Typhoon Haiyan and capital flows returning to more developed economies, the report said.

The country's gross domestic product (GDP) grew by 7.2 percent last year, and net foreign direct investments experienced a 36.6 percent year to date growth.

"The growth in the business process outsourcing sector, the entrance of global players into the local economy, and strong private consumption continue to make the Philippines' real estate market one of the most attractive in Asia," said KMC MAG Group Man­aging Director Michael McCullough. "With the country's continued eco­nomic growth, low interest rates, and capital costs, we expect the local real estate sector to continue performing well."

The current outsourcing trend in developed economies is expected to bring in additional foreign investments to the Philippines. Currently, the information technology­ business process outsourc­ing (IT­-BPO) industry is looking to create up to 124,000 jobs this year.

In the leasing market, KMC MAG Group noted the employment generated by the IT­-BPO sector will push annual take up to 400,000 sqm.

Rental rate increase

However, there is only an ad­ditional 320,000 sqm of office space available this year. This shortage is expected to translate to an increase in rentals, with the growth driving current rental prices to pre­-financial cri­sis levels.

The growth in the IT-­BPO sec­tor will also remain to be a major influence in the serviced office market, with at least three new serviced office centers opening to keep up with the demand for space.

"We expect more IT­-BPO com­panies to come in and invest in the country, due to its young, ed­ucated, English­-speaking labor force, affordable labor costs, and taxation benefits for investors," said McCullough. "The consistent growth in the IT­-BPO industry has driven demand to the extent that developers are confident in building without pre-committed tenants."

Tourism, which is another potential high growth industry, is driving investments in the hotel sector.

Meanwhile, strong private consumption, which accounts for nearly 70 percent of the country's GDI? continues to fuel the growth in the residential and retail markets.

The growth in Filipinos' purchasing power has driven demand for subdivisions, townhouses, and condominiums, and has also attracted global retailers looking to gain a foothold in the country.

Increased purchasing power "Local developers have noticed the increase in purchasing power, particularly among the middle class, and are now re­sponding to this growth by ex­panding their portfolios and partnering with international in­vestors for new developments," added McCullough.

In Metro Manila, the three top business districts continue to experience activity in both residential and office sectors.

Makati and Bonifacio Global City is still attracting multina­tional corporations, IT­-BPO companies, and entrepreneurs, as well as the high end and luxury residential sector, with Boni­facio Global City having the highest take up in 2013.

"In Makati, vacancy rate in the office sector is temporarily high, but the demand created by shortage in prime office space can absorb the vacancy," shares McCullough. "Meanwhile, in Bonifacio Global City, the vacan­cy rate is expected to drop due to the strong demand, despite the continued expansion in its in­ventory."

Ortigas is shaping up to be a potential BPO hub, given its accessibility to labor from nearby areas such as Pasig, Quezon City, San Juan, Taguig, and Marikina.

"Ortigas has the lowest vacan­cy rate among all of the business districts; however, we expect this to change because of the new supply," said McCullough. "Among the business districts in Metro Manila, Ortigas also has the lowest average rate for Grade A office space, which can make it an attractive location for IT­-BPO companies looking to in­vest in the Philippines."