Philippine property markets ended 2015 on a high note, posting growth driven by developers’ expansion in their portfolios, property advisor CBRE Philippines said.
In its Q4 2015 Marketview Report, CBRE said property developers kept their aggressive stance on the back of the country’s strong economic performance and political stability.
“Listed developers ended 2015 with a strengthened portfolio by increasing their inventories of shopping malls, office buildings, hotel rooms and townships,” CBRE noted.
The firm specifically noted developers’ aggressive stance on major property sectors, namely, office, residential and retail.
Notable deals made in the last quarter of 2015 were the record sales of the abandoned JAKA tower by Alveo Land; SM Prime’s purchase of a two-hectare lot from DMCI for a residential community; and Vista Land’s acquisition of Starmalls, to consolidate its residential and shopping mall initiatives.
“Developers’ quest to expand its sources of recurring revenue and translate these acquisitions into profitable investment will sustain the progress of the local real estate market,” the CBRE report said.
The report said high demand from foreign locators through the outsourcing business industry continued to propel the office market.
“The country continues to be a top choice of foreign locators because of its excellent pool and the low cost of skilled labor and outstanding customer service,” CBRE said.
It added that the Philippines also has one of the cheapest rental rates and highest yields in Asia.
With demand for office space coming in from foreign firms, the Metro Manila office market posted an average rental rate of P879.47 per square meter per month. This was a 2.54 percent quarter-on-quarter growth from the third quarter.
“Optimism in the office market will continue to be supported by the expected investment boom brought about by the country’s improving fiscal position, favorable demographics, and lower operating cost,” the report noted.
The property advisor said the retail property sector ended 2015 on a high note, with the opening of several developments, partnered with the entrance of new foreign brands.
The last quarter of the year saw openings of new malls, such as the Uptown Mall in Bonifacio Global City, Circuit Mall in Makati, and the Grand Canal Mall in McKinley in Taguig. The quarter also saw the opening of Cherry Fooderama in Mandaluyong City.
CBRE said the expansion of malls, including that of the Shangri-la Mall on Shaw Boulevard, paved the way for more brands to set up shop in the country.
“The newly opened malls and retail podiums amount approximately 205,689 square meters,” the report said. “Although open to the public, there are still available spaces in these developments. Other than the operational establishments, pre-leased cuts are seen throughout the malls.”
CBRE also noted the entrance of several foreign brands during the quarter, most of which are from the food and beverage industry.
These included Din Tai Fung, Casa Italia, Rocky Mountain, Chocolate Factory, and Applebee’s.
“The entry of more foreign brands also continues to stir up competition in the retail market, challenging the local competition to become more inventive in their products and services for consumption,” CBRE said.
It also noted that foreign brands took up most of the retail space in malls located in the central business districts during the quarter.
“This trend is seen to boost demand and take-up of space, both existing and upcoming,” the report said.
The report also observed a focus on luxury condominiums by developers during the last quarter of the year, as more expatriates move from lessees to unit owners.
“Demand emanates from the increasing expatriate community in the country and the overseas Filipinos working abroad,” CBRE said.
The report noted that Metro Manila continues to be the top investment destination for luxury condominium buyers, while BGC and Makati are the top prime locations on the back of their proximity to major commercial districts.
CBRE pointed out that luxury apartments are also considered as a global tool of investment for foreigners that seek higher return for their funds.
“The Philippine market is relatively cheaper compared to other locat ions in Asia, which benefited the demand for residential condominiums,” the report noted.
The Philippine Economic Zone Authority (PEZA) recently announced nearby Asian countries are potential investors in the Philippines’ industrial sector, as these investors seek 25 to 30 hectares of land with the eco-zones.
“Souring relationship between Japan and China has prompted investors in the former to look into other parts of Asia, particularly the Philippines, for locations where they can transfer their operations,” the report said.
CBRE noted that investors have their sights on the country’s economic zones because of the incentives and perks offered by the government.
“For 2015, total investments approved by PEZA grew by 5.6 percent to P295.09 billion from P279.48 billion in 2014,” the report said.
CBRE said this has created a total direct employment of 1.24 million as of October 2015.