THE new administration should continue to give full support to the business process outsourcing (BPO) sector because it will still be one of the top performing sectors over the next 10 years, a real estate services firm said.
In a recent interview, KMC Savills Inc. head of research Antton Nordberg told reporters that despite the optimistic outlook for the industrial sector, it is the BPO industry that is sure to remain one of the top performing sectors through the next decade.
“The new administration, they shouldn’t be worried about the industrial sector. They really should do everything they can for the BPO sector because that’s where we have higher margins, which can foster growth in the next 10 years,” Norberg said.
The Duterte administration’s focus on infrastructure development indicates potential growth for the industrial sector as it will require the necessary infrastructure in order to flourish, Nordberg said.
It was recently reported that the proposed 2017 budget for infrastructure development is at P860.7 billion, or about 5.4 percent of the country’s gross domestic product (GDP).
“There’s already a lot of local players that have been land banking industrial land, but it really needs infrastructure first,” Nordberg expressed.
Nordberg projects it would probably take the industrial sector another 10 years before it could boom.
“I mean, yes, you don’t really build national highways in less than five years,” he said.
Yves Luethi, KMC Savills vice president for marketing and landlord services, agreed with Nordberg’s sentiments.
“The big players, of course they have the land already but now, the next 10 years is definitely still the BPO story, which is leading the way for commercial office real estate,” Luethi said.
Clark a potential hub
Nordberg indentified Clark as a potential industrial hub in the coming years.
“I would probably say Clark, because it’s near Subic, which actually has the seaports. So anywhere near ports will be an ideal hub,” Nordberg said.
Luethi added: “Also because the airports in Clark, in terms of manufacturing of goods in the Philippines, you also need to think of how you will get them out to the global market. That’s why it needs infrastructure.”
Luethi emphasized that important role of incentives to boost the industrial sector. “In Singapore, there has been a successful industrial [sector]because of tax incentives. I think there’s also structural political initiative which will come first,” he said.
Meanwhile, Nordberg noted that easing foreign ownership rules in the country would attract more investors into various sectors, including the industrial market.
“The world is taking notice of the Philippines as it is a promising investment destination. Raising the cap on foreign ownership will complement this and will further open the economy up to strategic industries, while also making current investors keen on expanding their foothold in the country,” Nordberg said.
“In addition, easing restrictions on foreign businesses would bring in more foreign investors in public utilities and other infrastructure that need big capital investments,” he said.
Boosting government spending on infrastructure and countryside development also opens more opportunities for Philippine real estate, as infrastructure eases the costs of logistics for industrial firms, said Michael McCullough, KMC Savills managing director.
“The industrial and manufacturing sectors have been dormant for a long time, but it looks like it could finally be on the rise,” said McCullough.
He added: “About 60 percent of FDI [foreign direct investment]applications over the past five years have been directed in the manufacturing sector, and we believe that this high interest will continue given the new administration’s plans.”
McCullough noted that with the foreign interest on the manufacturing sector, the industrial sector could be the next sector to “boom.”
“We’re optimistic that local consumption will offset the declining global demand, leading to an industrial real estate growth of 6-7 percent this year and exponentially after that,” McCullough said in a statement.
At present, Norberg noted that it is the Philippine office market that is gaining interest from foreign investors due to the attractive yields that it presents.
“The Philippine market is offering exceptional yields right now compared to the rest of the region and even other markets in the world,” Nordberg said.
Currently, the Philippine property market offers an office yield of around 7.5 percent.
“That 7 percent office yield is very attractive especially when you benchmark that with the government bond yields,” Norberg said.
The Philippine office market is currently one of the countries offering the highest yields in the region, aside from Vietnam, which has a yield of around 9 to 10 percent.
“The property sector is continuing its growth momentum, led by the strong office space segment in Metro Manila,” McCullough said.