CONTINUOUS public infrastructure spending under the Duterte administration’s “Build, Build, Build” program will further push the real-estate industry’s growth this year, according to Colliers International.
The government’s target to allocate 6 percent of the country’s gross domestic product on infrastructure is seen to create a positive effect on projects of property developers in major locations.
Per the leading global real-estate services and investment management company, the construction of airports, bridges, railways and toll roads in key areas nationwide unlock land values and strengthen the demand for transit-based developments.
By end of 2020, Colliers expects that about 1 million square meters of office space will be added to the total supply. There will be a net takeup of 960,000 sq m. Vacancy rates will reach 6.2 percent, up 5.5 percent from the previous year.
In the first nine months of 2019, the Philippine Offshore Gaming Operators (POGO) were the main drivers of the office segment absorbing 441,700 sq m of space, comprising 37 percent of the total takeup in Metro Manila during the period.
Expected to house most offshore gaming firms by then are the Bay Area, Ortigas Center and Quezon City which, in turn, will contribute to the lease rate hike in these sites. Outside the National Capital Region (NCR), POGOs are seen occupying more spaces in Cebu, Cavite and Clark this year.
The company estimates that around 15,610 housing units will add to the overall inventory in 2020. These will exceed the average of 10,700 units completed annually from 2016 to 2018—the periods when the industry gained from the “trickle-down impact of offshore gaming demand.”
Despite this, however, Colliers anticipates a shortage of skilled construction workers as a challenge this year, which may lead to the slowdown of completion of residential projects in the Metro.
Amid the headwinds and the uncertainty brought on by the proposed tax reforms, it maintains that the rollout of infrastructure projects in major areas outside of the metropolis, ending in the rise of urban townships, will propel the office and residential supply outside the NCR. The firm suggests that investors and developers should consider Davao for this kind of development.
Metro Manila traffic is here to stay, but not until the construction of train lines, expressways and subways are finished within 2022 to 2025. Mindful of this situation, developers have opted to build co-living residential places near business hubs.
Colliers recommends integrating childcare facilities, cooking areas and private lounges to cater to the needs of the main market of young professionals and employees of both outsourcing and non-outsourcing companies. It’s also likely that the cohabitation trend will trickle down to key areas outside of the Metro.
Since college students are another potential market to tap in 2020, developers already consider building condominiums near universities. Colliers said that their average monthly budget for a dorm in Metro Manila is around P4,001 to P6,000 while their commute allocation is more than P4,500. This determines the amount they are willing to pay for rent to be near enough to walk or to take one bus, UV Express, or point-to-point ride to school or work.
The retail subsector of real estate will have about 310,000 sq m of new space this year, which is seen to increase vacancy rates to 12 percent and lease levels at 1 percent compared to 2 percent in 2019.
Given that around 1 million sq m of new leasable retail supply will be finished in the next three years, Colliers believes that mall operators need to implement innovative rental strategies to attract tenants and fill the space.
For NCR mall developers, for instance, Colliers cites that the demand will be coming from flexible workspace operators, who are “scrambling to find suitable space” in premium locations, such as Makati and Bay Area due to office vacancies between 0.5 percent and 1 percent.
Meanwhile, redeveloping malls into a more lifestyle-centric destination is another magnet for younger mallgoers and retain old consumers, resulting in improved consumer retail traffic and increased foot traffic.
Pipelined for the hospitality industry are 3,300 new hotel rooms to be completed and likely to be absorbed by the sustained growth in foreign arrivals. This will bring occupancy rates to about 70 percent, according to the property management services provider.
Based on data from the Department of Tourism, tourist arrivals hit 6.8 million from January to September of last year, or 15 percent more than the number of foreign visitors during the same period in 2018.
This trend is projected to drive the hospitality sector forward, with higher hotel occupancy and spending in tourist destinations in and out of Metro Manila.
Specifically, Colliers gives a hint for developers to put up three- and four-star hotels in Quezon City to address its lack of quality accommodation to cater to major tourist groups. Outside of NCR, it suggests them to consider airports being developed, such as those in Clark, Pampanga; and Cavite, Bulacan, and Davao when looking for areas of development.