PH real estate market a bright spot in Asia, says Savills local affiliate
MANILA - The Philippines' real estate market would continue to
be one of the most attractive in Asia given the country's robust
economic growth and business process outsourcing (BPO) sector,
according to the local affiliate of London-listed Savills.
In a briefing today, KMC MAG Group vice president Yves Luethi
said Manila is "very attractive " to investors because of its
"sweet spot" demographics, talented labor pool, continuously
growing BPO and tourism sectors, strong domestic consumption and
higher government spending.
He said Manila still has a relatively low price level within the
According to a Urban Land Institute report, Manila ranked as the
fourth most preferred city in Asia Pacific for real
estate investors, outperforming Singapore, Hong Kong and
Tokyo topped the list followed by Shanghai and
"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," Michael
McCullough, KMC MAG Group managing director said.
"With the country's continued economic growth, low interest
rates, and capital costs, we expect the local real estate sector to
continue performing well," he added.
The Philippine economy grew by 7.2 percent last year from 6.8
percent in 2012. For this year, the government is aiming for
growth of 6.5-7.5 percent.
KMC MAG Group said the current outsourcing trend in developed
economies is expected to bring in additional foreign investments to
the Philippines, with the information technology-business
process outsourcing (IT-BPO) industry looking to create up to
124,000 jobs this year.
In the leasing market, KMC MAG Group noted that employment
generated by the IT-BPO sector will push annual take up to 400,000
However, there is only an additional 320,000 square meters 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 a major
influence in the serviced office market, with at least three new
serviced office centers opening to keep up with the demand for
"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," McCullough said.
"The consistent growth in the IT-BPO industry has driven demand
to the extent that developers are confident in building without
pre-committed tenants," he added.
Another potential high-growth industry, tourism, is driving
investments in the hotel sector. With the Department of Tourism
targeting 10 million arrivals by 2016, real estate giants such
as the International Hotel Group and the SM Group have made plans
to strengthen their brands and open new rooms, with around
8,000 new rooms to be introduced in Metro Manila by 2015.
Meanwhile, strong private consumption, which accounts for nearly
70 percent of the domestic economy, 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.
"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," McCullough
In Metro Manila, the three top business districts continue to
experience activity in both residential and office sectors. Makati
and Bonifacio Global City continue to attract 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," McCullough said.
"Meanwhile, in Bonifacio Global City, the vacancy rate is
expected to lower due to the strong demand, despite the continued
expansion in its inventory," he said.
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. 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," McCullough said.