CB Richard Ellis sees uptrend as foreign investors take position

The Philippine economy appears on the upswing as far as the real estate sector is concerned and foreign investors are beginning to position themselves, according to real estate consultancy firm CB Richard Ellis.

In a press conference, Rick Santos, chairman and president of CB Richard Ellis Philippines Inc. (CBREP), noted at least three trends that augur well for the Philippine real estate sector and which members of the Constitutional Commission, should consider in deliberating on the possible liberalization of restrictions on land ownership.

One is the increasing number of tourists arrivals in the country and the subsequent improvement in hotel occupancy rates.

Trent Frankum, director of investment and corporate services at CBREP, pointed out the high number of Korean tourists visiting the Philippines.

Frankum said Korean tourist arrivals from January to September this year increased 28.5 percent compared to the same period last year. Thus, Korean tourists are now the second biggest visitor group to the Philippines.

Chinese tourist arrivals, likewise has increased at an astounding rate of 146.7 percent Frankum cited.

Santos added that average deluxe hotel occupancy rate from January to August this year registered at 73.03 percent and is expected to improve with the holiday season.

Santos revealed that some of Makati’s deluxe hotel are already fully booked.

Furthermore, Santos said the occupancy rates for high-end serviced apartments such as Oakwood and Fraser Place are consistently above 90 percent and often reach 100 percent.

"These trends, along with the increasing number of light options to the Philippines and the continued announcements of new hospitality and leisure projects, are direct reflections of renewed business and investor confidence in the Philippines’ hospitality and leisure sectors," Santos said.

The second positive trend is the improving office vacancy levels.

Santos reported that for the third quarter of this year, vacancy levels for premium or grade A Makati offices fell to 5.4 percent while average rental rates rose 7.8 percent from P510 per square meter to P550 per sqm.

The reason for the improving vacancy levels is due to the continued influx of call centers, business processing operations and other information technology-enabled services companies.

Santos said that industry experts forecast 100 percent growth in call center seats over the next two to three years which would translate to strong demand for more premium or grade A office space, increase hotel and serviced apartment occupancy and a large middle class who would need more suitable housing, retail, entertainment and tourism options.

Thus, Santos said "the entire Philippines stands to benefit as the outsourcing industry increasingly looks beyond Metro Manila for new locations with untapped labor markets."

Joey Rodovan, CBREP director of corporate services, elaborated that "given the low vacancy rates and the lack of both contiguous office space in prime or grade A building and available land on which to build upon, call centers/BPOs with larger space requirements are increasingly being forced to move to alternate central business districts (CBDs) and fringe areas of the city where they are building their own build-to-suit buildings or are converting shopping malls and other types of retail establishments into suitable space."

The third favorable trend is the continuing disposal by local banks of their non-performing assets.

CBREP pointed out that P97 billion worth of non-performing loans (NPLs) so far have been sold by local banks and CBREP has been active in helping sell some of the real estate properties.

Thus, with these three trends, Santos stressed that "now is the right time to eliminate this outmoded restriction on land ownership."

He noted the benefits to eliminating the restrictions would be "far reaching."

Santos predicts that infrastructure, agriculture, tourism, commercial and office, and industrial development and investment would greatly improve while foreign investors would be encouraged to conduct more long-term business in the country, reducing unemployment and increasing productivity.

The market for land, especially land located in the CBDs and industrial parks would be strengthened and become more liquid, benefiting small and large land owners, Santos said.

As land is developed and land value improve local governments would be able to collect more revenues from taxes and other fees to further investment in badly needed infrastructure and services," he added.