Twenty-twenty will continue to be a positive year for the Philippine real-estate market despite headwinds, with the Philippine offshore gaming operators (POGO) industry overtaking the information-technology and business-process management (IT-BPM) industry as the main real-estate driver.
JLL Philippines—the country’s premier real-estate services firm—shared its 2019 market overview and 2020 outlook during its first Know the P.O.I.N.T. (Predictions, Opportunities, Insights, News and Trends) for the year, with Janlo de los Reyes, JLL’s head of Research and Consultancy, spearheading the discussion. The event was held in partnership with the IT and Business Process Association of the Philippines (IBPAP).
Contributing to the exchange were Michelle Perlas, Common Ground’s head of Real Estate; Sam Peterson, Loc&Stor 24/7’s founder; and JR Yujuico, Point Blue’s CEO. They shared their insights on the conception and evolution “World of COs” or co-working, co-storage, and co-living sectors, respectively.
Aside from the continued momentum of the online gaming industry and its effects to related sectors, the real-estate market will also be defined by other prominent factors, such as the demand for sustainability, government policies, and emerging lifestyle trends and technology.
Online gaming to maintain momentum, demands shift to emerging markets
Office take-up of POGOs has been increasing since 2017, growing at a faster pace than the IT-BPM sector. POGO growth rate was at an annual average growth rate of 61 percent from 2017 to 2019, while IT-BPM grew at a slower 36 percent for the Metro Manila real-estate market, which demonstrates the slowdown of IT-BPM occupiers in terms of expansion plans or entry to the Philippines.
However, IT-BPM demand is still stable and will remain the leading real-estate demand driver in Metro Manila, mainly due to developments in the POGO industry in 2019, including government restriction of new applications, crackdown on illegal Chinese online gaming activities, and rise in tax collections.
Landlords in Metro Manila have taken prudent measures against any adverse effects of this crackdown by limiting its office space offering to POGOs.
This year, these supply constraints and policies will shift POGO office space demand to periphery areas of the Metro and other key cities in the country. In fact, giant POGO hubs are already in place in Cavite City and Angeles City, Pampanga, to accommodate the industry movement.
“With the office space demand shifting outside of Metro Manila come other real-estate opportunities, including residential, hospitality and retail,” said de los Reyes. “POGO employees take up hotels as an alternative to housing, driving up hotel occupancy. Similarly, housing requirements drive up sales take up, selling prices, and rents of mid-segment developments.”
Residential prices to grow at a slower pace
While 2019 saw the residential sector reach historical highs, JLL projects uneven performance for 2020. Residential prices will grow at a slower pace with an annual average growth of 3.1 percent in Makati and Bonifacio Global City Markets.
“Upscale and low-end segments will maintain their stable performance while the middle-market becomes more competitive,” said de los Reyes.
He said that the sale and lease demand from high-net worth individuals and expatriate employees in the middle and upscale market are expected to remain solid and is likely to continue propping up residential values.
Demand for resiliency and sustainability
Sustainable or “green” buildings have gained prominence in 2019 and will continue to be so in 2020, JLL forecasts, citing an increasing importance of sustainability and resiliency in real estate decisions.
“A lot of developers are including sustainability as part of their core values, and they are incorporating sustainable features in their upcoming projects,” said de los Reyes.
Average vacancy rate of green buildings in Makati central business district is 3.99 percent, while nongreen buildings is at 6.27 percent, showing a preference and higher demand for green buildings. Because of this, monthly rent per square meter in green buildings in the city has gone up, ranging from P950 to P1,900, while nongreen buildings ranging from P850 to P1,650.
Laws to reshape the narrative of real estate
De los Reyes also cited several government policies that will shape the real-estate market in 2020.
In 2019, uncertainties in policies have impacted the industry. The crack down on POGOs affected the movement of real-estate industry, and the Corporate Income Tax and Incentives Rationalization Act (Citira) and the Philippine Economic Zone Authority moratorium weighed down the IT-BPM sector, citing a 16-percent dip in the investment pledges from Peza.
But for 2020, de los Reyes said that the recent developments in Citira, along with policies concerning real-estate investment trust (REIT) and retail trade, will positively affect the real estate industry.
“Citira, which used to be one of the hurdles of investors in the Philippines, has now been refined. It can better address the concerns and needs of investors, including the elimination of risks of massive unemployment and/or exit of foreign manufacturers and IT services,” he said.
Lifestyle trends redefining real estate
JLL’s Know the P.O.I.N.T. event touched on co-living, co-working, and co-storage, hot sectors which are experiencing an upswing in the country and redefining the real-estate market.
Lizanne Tan, JLL Philippines’s head of Commercial Leasing, and Paul Ryan Isip, JLL Philippines’s head of Capital Markets, talked about co-working and co-living, respectively, to complement the insights of Perlas, Yujuico, and Peterson.
Tan said co-working is gaining momentum in the Philippines as more organizations are seeing the benefits of this setup, and co-working space players are continuously expanding to match the demand. More than 80 percent of co-working spaces are located primarily in central business districts such as in Makati and Taguig.