Real estate sector still strong – CBRE

MANILA, Philippines - The Philippine real estate sector is expected to remain strong beyond 2016, amid sustained demand from the business process outsourcing (BPO) sector, real estate consultancy and service provider CBRE Philippines said.

“The resiliency of the Philippine economy and the real estate sector is expected to continue beyond 2016,” Rick Santos, CBRE Philippines founder, chairman and chief executive officer said in a press conference yesterday.

This, as the sustained momentum of the BPO sector is seen to drive the continued growth of the real estate sector.

“Philippine BPO expansion looks to be on a strong 10-year run in Philippine real estate,” Santos said.

Even as 2016 is an election year and politics is always a factor considered by investors, BPO firms are looking to set-up or expand in the Philippines due to continued demand for services from overseas.

“With the BPO sector, like overseas Filipino workers remittances, it is based on external factors…basically the need to reduce costs and perform jobs in other areas at lower costs. It is pretty easy going to continue well past 2016,” Santos said.

John Corpus, CBRE director for corporate agency and brokerage said in the same event that based on feedback from clients, there are no signs of a slowdown in demand from the BPO sector with firms already looking to secure office space from new supply expected to come in next year and in early 2016.

“We don’t see signs of slowdown in the next 24 months mainly because our clients are expanding. Those that tested market initially are looking at second sites…2015 and early 2016 stocks are now on the radar of these companies,” he said.

For his part, Jason Abraham, CBRE associate director for corporate agency and brokerage said the demand for BPO services is not only coming from US firms, but also from Japanese companies.

With strong demand for BPO services and office space, Joanie Mitchell, CBRE consultant for corporate agency and brokerage, said clients want developers to build at a much faster pace.

“Demand is so much. Speed to market is what it is all about,” she said.

Of the 700,000 square meters (sqm) of new office supply expected this year, about 600,000 sqm would be taken up, with 80 to 90 percent to be accounted for by the BPO sector.

Apart from the BPO sector, expansion among multinational firms is also driving demand for office space.

CBRE associate director Morgan McGilvray said an important factor in the strong demand seen for office space here is Metro Manila’s rental rate which is by far, the cheapest in the region at $29 per square foot per annum.

“The difference is about five times. Even if rates rise, there is still cushion,” he said.

The country’s strong macroeconomic fundamentals and available young talent pool are also factors driving continued growth in the BPO sector as well as expansion of foreign firms.

As the BPO sector grows, demand for retail space and residential properties are expected to follow.

CBRE senior director for research and consultancy Jan Paul Custodio said the country’s retail sector, like the office sector offers the lowest rate at $38 per square foot per annum, making it an attractive location for brands.