Property sector to benefit from increased US interest

MANILA, Philippines - Property consultancy firm CBRE Philippines says the increase in infrastructure and economic reforms, despite the first quarter slowdown and trickle effects of last year’s calamities, bids well for foreign investors looking into the country’s real estate market.

 The world continues to recognize the Philippines’ remarkable economic growth, as seen in the recent World Economic Forum discussions and as noted by US Secretary of Commerce Penny Pritzker. “One of the core missions of the Commerce Department is to assist American businesses as they navigate new markets, reach new customers, and develop new opportunities in existing markets,” stated Pritzker in her recent visit to the Philippines, which highlighted US investor interest. Coupled with the rising middle class, GDP growth and educated workforce, more investors are expected to flock the Philippine market.

 “The growing interest in the Philippine market can strengthen the real estate sector. As these foreign investors increase their presence in the country, demand for real estate space— especially in office, commercial, and hospitality—would rise as well to support their needs,” affirmed Rick Santos, chairman, founder and CEO of CBRE Philippines.

 In the latest market study of CBRE, office take-up in Metro Manila surpasses that of Tokyo and Singapore. Rental rates remain the most appealing among Asian countries at $26/sq. ft./annum. The uptick in vacancy rates to 2.13 percent from 1.98 percent also poses more opportunities for investors to set office in the country’s main central business districts. For instance, more than 20 upcoming office buildings are expected to rise in Bonifacio Global City alone. Similarly, the rise in demand is expected bring in more than 550,000 square meters of office space. Developers are also eyeing locations around the Metro – Laguna, Clark, and Baguio – to supply office space demand.

 Currency levels, at P44 to P45, also elicit positive response from the business process outsourcing (BPO) sector. “The BPO sector will remain strong in 2014 as banks and financial institutions in the West relocate their back operations to the Philippines and as the Indian rupee continue to strengthen,” stated Santos. The educated and skilled labor force of the Philippines is also a major contributor to US interest, parallel to the office expansion of companies. BPO relocation is expected to be more in demand with the upcoming ASEAN integration.

 Similarly, the commercial and hospitality sectors of real estate would benefit from the US’ increased interest. The rising number of foreign brands in the Philippines only encourages others to follow suit, according to Santos. This year, retailers such as H&M and brands like Pull & Bear, Givenchy, and Family Mart are expected to enter and expand in the country.

 At least 170,000 square meters of new retail space was introduced in the first quarter of the year. The robust consumer spending further puts retail and commercial investors in a good place, as they supply the demand.

 Mixed-use developments that combine office, retail, and even residential aspects, are on the rise to support the space requirements of a changing demographic. Likewise, hotels can expect an increase in occupancy as more foreign investors hold their transactions in the Philippines.

 “Manila has been seeing the arrival of new high-end hotels with the opening of the Fairmont, Raffles, and Holiday Inn. Big hotel chains such as the Ascott, Marriott, Conrad, Sheraton, and Hyatt are expected to bring in more business and tourists alike,” added Santos.

 Renewed US interest in the Philippines is envisioned to transform and strengthen the real estate sector. “Now that we are back on the US radar screen, it’s time for the real estate sector to step up and meet current and upcoming demand,” concluded Santos.