“The robust demand for office space from the BPO industry is changing the landscape of a number of cities,” according to the Philippine Real Estate Market Insight — 3rd Quarter 2016 released by Pinnacle Real Estate Consulting Services, Inc. on Monday.
Pinnacle cited Baguio City; Davao City; Dumaguete City; Iloilo City; Lipa City; Metro Bulacan (Baliuag, Calumpit, Malolos City, Marilao and Mecauayan City); Metro Cavite (Bacoor City, Dasmarinas City and Imus City), Metro Laguna (Calamba City, Los Baños and Sta. Rosa City), Metro Naga (Naga City and Pili) and Metro Rizal (Antipolo City, Cainta and Taytay).
“Apart from office spaces, these markets would probably experience developments of the residential and commercial retail spaces, and perhaps, hotel rooms as well,” Pinnacle said.
BPO firms are locating in what Pinnacle called the “Next 10 Cities” for their healthy demographics and relatively developed infrastructure, according to the research titled “More of the Same” in reference to the property market’s prospects under the Duterte administration.
“Perhaps the top priority of President Rodrigo R. Duterte may be different from his predecessor, that is anti-illegal drugs vis-a-vis anti-corruption, but the fervor of both presidents are almost similar,” the report, prepared by Pinnacle Director for Research and Consulting Jose Romarx Salas, stated.
With the government crackdown on illegal drugs resulting in “hundreds” of people being killed, Pinnacle noted: “This is becoming alarming to some, but it still pales in comparison to the anti-illegal drugs campaigns in Mexico, Colombo and other countries.”
“What is amazing is how Filipinos quickly adjust to new political realities and how the economy and real estate market continue to chug along,” the consultancy said, with macroeconomic indicators supposedly pointing to a “strong economic footing” as well as more growth and development.
Pinnacle deemed the economic policies of the Duterte administration as “more business friendly” and social policies as “more populist” when compared to those implemented by the previous leadership.
“The government has been aggressive in continuing infrastructure developments and is promoting public-private partnership projects. President Duterte has been espousing dispersed development, and has been keeping an eye in solving problems in the Metropolis as well,” Pinnacle said.
The government’s thrust to develop the countryside bodes well for the “Next 10 Cities” from the perspective of the property market, in particular.
“With the push of President Duterte to disperse spending and growth, development of these ‘Next 10 Markets’ is likely to happen sooner,” Pinnacle said, citing infrastructure projects the government intends to undertake through public-private partnerships.
The government has awarded the P23.2-billion North Luzon Expressway — South Luzon Expressway Connector Road to Metro Pacific Tollways Development Corp. It also plans to build a P374-billion rail network system that includes a subway within Metro Manila and railways extending to Pampanga, Cavite and Laguna.
“These infrastructure projects would have very positive impact to the economy and the real estate market,” Pinnacle said.
The consultancy further cited government efforts to maintain the Philippines’ attractiveness to investors, including the ongoing review of stringent tax regulations keeping real estate investment trusts from taking off.
“On the real estate side, the government is looking to address the bottlenecks in the land administration and management system,” Pinnacle said.
The office segment will particularly benefit from the sustained expansion of the BPO industry, which could employ 1.3 million employees and generate $25 billion in annual revenues in the next couple of years.
“Industry experts are saying that the growth in the next five years would range between 12% and 18%, or two to three times the world’s average of 6% annual growth. Buoyed by this continuous growth, real estate developers are relentless in building and delivering office spaces,” Pinnacle said.
In the next two years, Pinnacle expects more than 1 million square meters of office spaces to become available in major businesses districts in Metro Manila, bringing the total above the 7-million mark.
“While the planned office stock of Grade A and Prime Grade A office stock seems high, it is important to note that overall vacancy across these business districts is now below 4%,” Pinnacle said, adding that construction delays could arise from the shortage of skilled labor.
Pinnacle observed more developers are selling office spaces rather than renting them out, with less than 10% of the total stock spanning 7 million square meters being sold at present.
“Selling of office spaces is now a growing trend,” the consultancy said. “This is seen to steadily grow in the coming quarters. Selling prices in Makati and BGC business districts are north of P200,000 per square meter.”
The industrial segment is expected to expand alongside, as the demand for industrial spaces grows and manufacturers expand their operations, amid the government’s thrust to rebalance the economy long driven by domestic consumption and services.
In the residential segment, the affordable and socialized housing segments remain underserved. The housing backlog could reach more than 5.5 million by yearend, according to latest data from the Philippine Statistical Research and Training Institute.
The demand for high-end condominium units remains robust as well. The tight supply of skilled labor has delayed construction of such developments catering mostly to local executives and expatriates, Pinnacle said.
The retail segment could witness further expansion of big players and proliferation of different retail platforms. The hotel and gaming segment, meanwhile, is seen benefitting from increasing tourist arrivals and diversification of attractions.
The expansion of the property market has started outside Metro Manila, according to Pinnacle, with Metro Cebu emerging as the “secondary center” of the Philippines.
“Metro Cebu, led by Cebu City, is the undisputed secondary center of the Philippines. In terms of cost of living and prices, the Cebu market is comparative to Metro Manila. In terms of education and culture, Cebu highly influences the Visayas and Mindanao islands,” Pinnacle said.