STRONGER GDP CON­TIN­UES TO BOL­STER PROP­ERTY SEC­TOR

Philippine Daily Inquirer - - PROPERTY -

The Philip­pines’ ro­bust real es­tate mar­ket is ex­pected to be sus­tained over the next two to three years by a strong eco­nomic growth fu­eled by in­creased in­fras­truc­ture spend­ing, im­proved credit rat­ings, de­cel­er­at­ing in­fla­tion, and a higher rank­ing in the global com­pet­i­tive­ness sur­veys.

Q3 per­for­mance

Lat­est gov­ern­ment data showed that the econ­omy ex­panded by 6.2 per­cent in the third quar­ter this year, mak­ing the coun­try one of the fastest grow­ing economies in Asia ahead of China’s 6 per­cent and next to Viet­nam’s 7.3 per­cent.

The third quar­ter gross do­mes­tic prod­uct (GDP) growth was also faster than the 5.6 per­cent posted in the first six months of 2019. The im­prove­ment can be at­trib­uted mainly to gov­ern­ment spend­ing, with public con­struc­tion ris­ing by 11 per­cent in the third quar­ter of 2019, from a 27 per­cent con­trac­tion in the sec­ond quar­ter.

Pri­vate con­struc­tion rose by 19.1 per­cent, sus­tain­ing the 10.4 per­cent growth posted in the third quar­ter of 2018. This in­di­cated a strong ap­petite for of­fice tow­ers, res­i­den­tial units (con­do­mini­ums and house & lots), malls, ho­tels and in­dus­trial parks across the coun­try.

Off­shore gam­ing

Col­liers has ob­served that while Metro Manila of­fice’s de­mand driv­ers re­main di­ver­si­fied, the off­shore gam­ing firms or Philip­pine Off­shore Gam­ing Op­er­a­tors (Pogos) con­tinue to out­pace oth­ers in terms of share to to­tal leas­ing trans­ac­tions.

For the first nine months of 2019, off­shore gam­ing ac­counted for 37 per­cent of all closed deals, rep­re­sent­ing about 442,000 sqm of of­fice space. Pogos cur­rently oc­cupy about 10 per­cent of to­tal leasable of­fice space in Metro Manila or 1.14 mil­lion sqm.

We re­main op­ti­mistic that Pogos will con­tinue to lead the of­fice space take-up over the next two to three years es­pe­cially with con­tin­ued ef­forts from law­mak­ers to le­git­imize their op­er­a­tions.

In the of­fice seg­ment, among the head­winds that Col­liers sees over the next three years in­clude slower GDP growth (mul­ti­lat­eral lend­ing firms and for­eign banks are now pro­ject­ing a 6 per­cent growth from the pre­vi­ous 6.2 per­cent). A slower do­mes­tic econ­omy is likely to slow down the ex­pan­sion of tra­di­tional and non out­sourc­ing ten­ants; and out­sourc­ing firms (call cen­ters and shared ser­vice firms) tak­ing a wai­t­and-see stance due to the un­cer­tainty over the tax re­form pro­posal of the gov­ern­ment which in­tends to re­duce tax perks that th­ese firms en­joy.

Col­liers en­cour­ages land­lords to help out­sourc­ing ten­ants iden­tify vi­able al­ter­na­tive sites out­side Manila par­tic­u­larly with the na­tional gov­ern­ment’s push to ex­pand out­sourc­ing op­er­a­tions in sec­ond and third tier cities.

Pogo firms have also started to oc­cupy space out­side Metro Manila and land­lords should of­fer op­por­tu­ni­ties in cities that ac­com­mo­date Pogo op­er­a­tions.

So­lu­tion to traf­fic cri­sis

The on­go­ing con­struc­tion and re­ha­bil­i­ta­tion of rail­way and ex­press­ways across Metro Manila has re­sulted in un­bear­able traf­fic jams across the cap­i­tal’s ma­jor roads. This has com­pelled devel­op­ers to build co-liv­ing projects near key busi­ness dis­tricts which pri­mar­ily cater to young pro­fes­sion­als who want to live near their places of work but can­not af­ford to buy or lease out con­do­minium units within the ma­jor cen­tral busi­ness dis­tricts.

Col­liers be­lieves that th­ese types of hous­ing are likely to re­main pop­u­lar among Metro

Manila em­ploy­ees es­pe­cially as ma­jor in­fras­truc­ture projects, in­tended to ease Metro Manila traf­fic, will likely con­tinue through at least 2025.

Col­liers sees a more pro­nounced de­vel­op­ment of th­ese projects and devel­op­ers should start in­cor­po­rat­ing dif­fer­en­ti­at­ing fea­tures such as child­care fa­cil­i­ties and pri­vate lounges for phone calls, for ex­am­ple.

Mid-in­come seg­ment de­mand

Col­liers has also ob­served that the take up of mid-in­come con­do­minium units, priced from P3.2 mil­lion to P6 mil­lion per unit, re­mains strong, ac­count­ing for the bulk (or 43 per­cent) of ag­gre­gate take-up in Metro Manila in the first nine months of 2019.

Mean­while, newly-launched projects, such as Alveo’s Park­ford Res­i­dences (P370,000 per sqm) in Makati CBD and Fed­eral Land’s Grand Mi­dori (P232,000 per sqm) in Or­ti­gas Cen­ter should fur­ther raise con­do­minium prices in key busi­ness hubs in Metro Manila.

To fur­ther ben­e­fit from the coun­try’s ro­bust real es­tate mar­ket and sus­tained eco­nomic growth, Col­liers en­cour­ages both land­lords and ten­ants to fur­ther ex­plore op­por­tu­ni­ties in the mar­ket by iden­ti­fy­ing ex­pan­sion sites and al­ter­na­tives for out­sourc­ing and off­shore gam­ing firms, and de­vel­op­ing more co-liv­ing and mid-in­come projects to ad­dress a grow­ing de­mand.

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