Philippine property sector poised for recovery

MANILA, Philippines — The country’s real estate sector is poised for recovery this year on the back of a positive economic outlook with the easing of pandemic-induced restrictions, according to real estate services firm Santos Knight Frank (SKF).

Data centers, which are seen as the next growth segment for the real estate sector, are expected to double in terms of supply capacity in the medium term.

In a briefing yesterday, SKF chairman and CEO Rick Santos said the company has an optimistic outlook for the property sector this year with the reopening of the economy.

“We will see a much more robust level of activity in the real estate sector this year, especially in key sectors such as industrial and logistics, REITs (real estate investment trusts), residential and office. We are particularly excited about prospects for data centers and renewable energy, which we predict will see high levels of growth over the succeeding years,” he said.

In the industrial and logistics sector in particular, Kash Salvador, director and head of investment and capital markets at SKF, said it would continue to be driven by e-commerce demand.

“Long-term structural fundamentals have positioned the industrial and logistics sector as one of the better performing real estate asset classes during the pandemic. That will likely remain so as warehouses still see significant demand partly driven by e-commerce,” he said.

While repurposing real estate into storage spaces has been popular during the pandemic, he said supply of fully equipped storage facilities has become a challenge.

He said this provides opportunity for property players to develop and accommodate the demand by occupiers.

For the office sector, Morgan McGilvray, senior director of occupier solutions and services at SKF, said supply pipeline is quite strong with construction of buildings being delivered despite the pandemic.

“We are still expecting about three million square meters or so from now until 2025,” McGilvray said.

He also said the firm expects demand to be better this year than in the last two years, to be driven by the business process outsourcing sector.

“We expect usual locations around the world to be providing most of the demand. That’s going to be US and Canada out of North America, Australia, New Zealand and Europe,” he said.

Monica Gonzalez, manager for occupier solutions and services and data centers lead at SKF, said the country’s data center market is seen to double in the medium term with several data center operators looking to set up facilities in the country.

She said a combined 125 megawatt (MW) worth of potential capacity could be added to the total capacity at present based on data center operators that have expressed interest to expand in the country.

At present, she said SKF research shows the country’s total data center capacity is at 94 MW.

In terms of how much space would be taken up by data centers, she said a 10 MW data center capacity would need at least one to two hectares.

She said the Philippines is becoming an attractive location for data center operators to set up facilities given its investment-friendly climate; strong government support to make the country the next hyperscalers hub in Asia-Pacific; renewable energy push; available land; as well as large pool of information technology (IT)  graduates that can fill required roles.

Data centers provide data storage and IT services to businesses.

Gonzalez said demand for data centers in the Philippines is being driven by rising digital consumption or use of e-commerce and cloud-based services; the ongoing moratorium on new data centers in Singapore; as well as the high number of social media users in the country.

While the data centers sector is seen to grow, she said there are still challenges.

“Data centers need space and power. Certainly, power supply would still be challenging. We have good network of power substations, and renewable energy supply but it still something that has to come up to speed to really accommodate the growing market,” she said.