Five provinces have joined Metro Manila in attracting interest from real estate investors, in part because of regulations that encourage expansion outside the Philippine capital, Jones Lang LaSalle, Inc. (JLL) said in a report on Thursday.
In the first half of the year, the Philippine real estate industry was marked by optimism “and the future only continues to look good,” said the real estate consultancy firm.
It said Metro Manila remains the focal area of the current and future real estate attention and movement, with the continued growth of the real estate sector in the coming years.
“Metro Manila’s property outlook for the next few years remains positive for the office, residential, retail, and hospitality property sectors,” it said.
It said offshoring and outsourcing (O&O), online gaming, and tourism drive and influence demand for all types of real estate classes in Metro Manila, although uncertainties are rising in recent periods.
In the second quarter, the expansion of pharmaceutical, food and beverage (F&B), fashion and skin care companies supported the growth of real estate.
“Supply for all property sector continues to grow as developers and investors try and take advantage of a healthy real estate market. Vacancy rates in Metro Manila remain low and manageable across all sectors while rates vary depending on location, but still remain reasonable,” it said.
JLL said a noticeable surge in property interest and activity in provinces outside Metro Manila, specifically in the Cebu, Davao, and nearby provinces Cavite, Laguna and Batangas.
The property market in Metro Cebu, which is made up of Cebu City, Lapu-Lapu City and Mandaue City, is currently experiencing a boom across all sectors.
In the second quarter, O&O firms, English as a Second Language (ESL) schools, online gaming operators, tourists, F&B companies, and the Meetings, Incentives, Conventions, and Exhibitions (MICE) market were all demand drivers that have caused significant growth in the Metro Cebu real estate market, JLL said.
“Local developers lead many of the current builds in Metro Cebu but major developers dominate the share for upcoming developments, indicating great desire to enter the Cebu property market,” it said.
“Cebu City enjoys the bulk of real estate action; Mandaue City mainly benefits from the completion of residential developments in Mandani Bay; and Lapu-Lapu City will lead in the share for upcoming supply in the hospitality sector,” it added.
In Davao City, a big increase is expected in the supply of a wide range of property in the near future.
“Ongoing builds in the Agdao, Buhangin, Talomo, and Poblacion districts — mainly driven by O&O firms; serviced offices; local and foreign students, OFW and local investors; expansion of brands with existing operations; and improving tourism performance should lead to a rise in supply across all property sectors of Davao City,” JLL said.
Meanwhile, the Cavite, Laguna and Batangas region will mainly benefit from the future developments of industrial lands.
“The completion of AG&P special economic zone 2 in Batangas and the development of more industrial parks in CALABA within the next three years should add up to 446 hectares to existing supply,” it said.
“The increase in supply is expected to fulfill demand for industrial property driven by the completion of government projects under the ‘Build, Build, Build Program’; the rapid growth of e-commerce leading to the need for improved logistics; and a revitalized manufacturing sector that needs to satisfy a growing domestic consumer base,” it added.
In its report, JLL cited several factors that have influenced businesses to expand outside Metro Manila, including Corporate Income Tax and Incentives Rationalization Act (CITIRA) legislation.
“The CITIRA Bill seeks to give a superior set of incentives to push investments in the country as well as reduce the corporate income tax rate from 30% to 20%. Businesses that want to create jobs, bring research and technology, and invest in areas that are not as economically developed as major urban cities will be given a superior set of incentives under the TRABAHO (Tax Reform for Attracting Better and High-Quality Opportunities) Bill,” it said.
It also cited the delays and problems experienced by businesses in the current processing for Metro Manila economic zone applications are pushing IT businesses to the countryside.
“Apart from this, the Information Technology and Business Process Association of the Philippines (IT-BPM) says there is currently a shortage in PEZA-registered IT-BPM space in Metro Manila which can potentially result to a significant jump in rental rates. This lack of space is expected to swell following Malacañang Administrative Order No. 18, which imposed a moratorium on the approval of IT-BPM ecozone projects in Metro Manila,” it said.
It said there is no question that Philippine Offshore Gaming Operators (POGOS) have been among the major drivers of office space demand.
“Because of their success, POGOS have even begun expanding their operations outside Metro Manila. While the controversy over POGOS in recent weeks has led to the suspension of the issuance of POGO licenses and the thorough examination of their activities, JLL believes that the office and residential sectors will survive and maintain its growth in the medium to long term even if POGOS exit the country,” it said.
JLL also cited the positive effects across all indicators that the Philippines has received resulting from the trade war between the US and China has spurred investment opportunities specially in exports, electrical and optical equipment, textiles, and chemicals.
“Businesses in these areas that are benefiting from the trade war will most likely seek to expand and most industrial properties are located outside Metro Manila,” it said.
JLL said further development of infrastructure projects that will link Cavite, Laguna, and Batangas to neighboring areas, especially Metro Manila, is expected to attract more foreign investments.
It also said the growing transactions built through the internet is significantly becoming a driver of demand for industrial space, including warehouse space, amid the increasing requirement of locators for distribution centers.
“The continuous growth of the Philippine real estate industry is in no small part due to the government’s programs, projects, and policies,” it said, adding that it was optimistic about the future and believes that the increase in property interest and activity outside Metro Manila “is a positive indicator that the much-needed economic development is well on its way to the provinces.”
SOURCE: Business World