Property consultancy firm CBRE Philippines forecasts a bullish performance for the real estate sector in the second half as the economy benefits from the sustained growth in remittances and the business process outsourcing (BPO) industry.
In a report, CBRE said that the Philippine remains resilient amidst the uncertainties in the global market and continues its robust growth due to the strong services sector, such as the BPO industry, and continued growth in cash remittances from overseas Filipino workers (OFWs).
CBRE Philippines chairman and founder Rick Ramos said that with strong macroeconomic fundamentals and continued growth particularly from the BPO industry, the demand for real estate in all sectors such as residential, retail, office and industrial will continue to rise.
The report noted that office rental growth in the second quarter of 2015 has been the fastest in three years as the rate of prime office rents in Metro Manila increased by 8.8 percent year-on-year.
Positive net absorption has been recorded in the second quarter of the year, as traditional office and IT-BPO companies take up more than 40,000 square meters of office space in Metro Manila.
Poised to be BPO capital of the world
CBRE Philippines director Morgan McGilvray said that the Philippines is poised to be the BPO capital of the world as demand for BPO services continues to pour into the country.
The report also highlighted that Metro Manila continues to be a top investment choice for outsourcing activities, second only to Bangalore in India.
McGilvray added that China’s devaluation of the yuan is a “win” for the BPO industry in the country since it will weaken the Philippine peso, therefore more foreign investors will come into the country due to cheaper rates of services.
The increase in investments in the BPO industry will drive the expansion of the office property sector to different areas in the country due to the limited supply of land in the metro.
Santos explained that demand for real estate is high in all sectors but it is the lack of developable land in the metro that pushes developers to explore the fringes, thus giving rise to ‘new wave cities’ such as Clark, Sta. Rosa, Cebu, Iloilo and Davao.
CBRE also noted that the growth potential in areas outside of Metro Manila is being maximized by developers as they continue to create mixed-use township projects in these areas.
“Actualizing the potential of new wave cities through strategic utilization of resources in these areas can increase the chances of these areas as the next home of local and foreign companies” added Santos.
One top destination from among the emerging new wave cities, according to CBRE, is Clark in Pampanga due to its potential as a real BPO hub because of its accessibility through air, land and sea; developable land and a skilled English-speaking labor pool.
CBRE said that the real estate developments in Clark are seen to draw in business investors once commercial space becomes available in the area. It also noted that with the anticipated office takeup from BPOS, the demand in other real estate sectors such as residential and retail are expected to follow.
Outlook bright for H2
The real estate consultancy firm is optimistic about the property sector’s outlook for the second half of the year.
It noted that pre-leasing of office space in new office buildings slated for completion in two to three years remains high, as the country’s macroeconomic fundamentals remain stable.
The report also mentioned that an increase in office supply is to be expected in the coming quarters.
“CBRE expects the increase in supply in the coming quarters to be accompanied with marginal increases in headline lease rates. The strong demand for office space coming from top multinational companies and IT-BPO firms is expected to continue,” it said.
It added: “The local office market continues to be healthy and positive net absorption is expected to remain as more companies transfer to the Philippines to capitalize on the Filipino talent and make their operations cost-competitive.”
The report also noted that the Asean economic integration will further support the growth of the office market.