Property sector seen to sustain boom

MANILA, Philippines - The world’s largest commercial real estate services firm expects the Philippine property market to remain upbeat, largely due to good fundamentals both as far as the local economy and the real estate sector are concerned, as well as poor conditions in many neighboring countries.

CBRE Philippines chairman and CEO Rick Santos said in a briefing that the Philippines remains an attractive place for locators, with the country having some of the lowest lease rates in the region. “The Philippines has some of the highest yields and demand for office space in Asia. The local office sector also has one of the best fundamentals in the region. We are seeing the start of a projected upscale in the Philippines,” he emphasized.

Aside from good fundamentals in the economy and in the real estate sector, Santos noted that the cost of office space in Manila is around 12 to 14 times less than that of Hong Kong. “It is very cost effective here,” he said.

The average lease rate for office space in the Philippines is around $20.2 per square meter per year compared to Hong Kong’s $89.92 and Kuala Lumpur’s $28.32.

The downcycle in the United States that has resulted in more businesses looking to outsource their business processes to countries like the Philippines will also augur well for the latter in the coming years, Santos added.

He said he expects office take-up in the Philippines to exceed 300,000 square meters this year compared to Singapore’s 150,000 square meters.

“We have not seen this much interest in Asia, and more particularly the Philippines, in recent years,” Santos stressed.

He noted that the Philippine real estate sector remained as a major contributor of growth, with the domestic economy still performing better than some of its neighboring countries. “Countries like Thailand and Japan are laggards due to its population already being adult, not to mention the calamities in Japan that are causing challenges and negative growth numbers, and the upcoming big election in Thailand,” he said.

Santos likewise noted that tourist arrivals are picking up in the Philippines. “Within the rest of Southeast Asia, the Philippines is back on the map as as investment destination. The key, however, is to keep inflation rates under control. But interest and mortgage rates are coming down, banks are awash with liquidity, and the country has a strong banking sector,” he said.

“We see great metrics in the business process outsourcing (BPO), tourism, remittances, gaming sectors in the Philippines. There is so much good new here,” he added.

For his part, CBRE vice chairman for global corporate services Joey Radovan noted that the Philippine BPO global share has much potential to grow to as much as 15 percent from eight percent as of last year.

The local BPO sector posted revenues of 4.2 percent of gross domestic product (GDP) in 2010. “Revenues reached $8.9 billion and are expected to triple to $25 billion by 2016,” Radovan said.

He also revealed that total number of BPO employees amounted to 525,182 with projections of an additional 500,000 over the next five years, translatingto the need to build close to three million sqm of office space.

Radovan also characterized the Philippine office sector as one with rising lease rates and falling vacancy rates.

He said Manila office rents are the second lowest in the Asia-Pacific region in the first quarter of this year at $20.2 per square foot per year.

“Office lease rates of major business districts continue to improve. Vacancy rates are also falling in all major Metro Manila business districts. There is also sustained office demand for both BPO and traditional offices,” he added.

CBRE Philippines reported that the Metro Manila office market is experiencing a steady rise in lease rates as vacancy rates continue to fall to single-digit levels as of the second quarter of 2011.