Regional investors show interest in Phl real estate opportunities

MANILA, Philippines - The dramatic expansion of both the office sector and shopping and mixed-use developments in the Philippines in the last decade has attracted the interest of key investors attending a recent Asia Pacific Real Estate Association (APREA) Singapore chapter meeting in the island state.

According to representatives of Jones Lang LaSalle Leechiu (JLLL) who discussed real estate trends in the Philippines, APREA officers and representatives of key real estate players in Asia were particularly impressed that three Philippine malls ranked among the top 10 largest malls in the world today.

David Leechiu, JLLL Philippines country head, cited that the office sector annual supply in Metro Manila had been growing by at least 300,000 sqm. in the last decade — save for the slowdown in 2010 — driven by the vibrant BPO industry. The audience included representatives of key real estate players in Asia such as Ascendas Pte Ltd, BNP Paribas, and CapitaLand.

Leechiu presented studies indicating that the trend would continue until at least 2013, given the continued expansion of existing BPOs and the relocation of new players to the Philippine market. In 2010, the industry employed around 520,000 and generated $8.9 billion in revenues. It is expected to grow to $25 billion in annual revenues and 1.3 million employees by 2016, according to the Business Process Association of the Philippines (BPAP).

Equally engaging to the real estate investors looking for opportunities in Asia was the “mallification” of key Philippine cities and the rapid growth of retail supply in Metro Manila, Cebu, Davao and other parts of the country driven by remittances of overseas Filipinos workers (OFWs). OFW remittances registered at $18.8 billion in 2010 alone.

According to Eric Manuel, senior manager of JLLL, another factor that has made retail an attractive asset class is the young population of the Philippines. He cited that approximately 65 percent of the population is below 30 years old, a demographic that is attractive to local and international retail brands and investors.

Studies by JLLL, the leading real estate services firm based in the Philippines, indicate that existing retail supply registered at 11.5 million sqm. as of the first half of 2011. Up to 2013, an additional 1.4 million sqm. will be constructed, mostly in the provinces.

Moira Robertson, executive director of APREA, disclosed that the macro-economic and industry figures presented by JLLL were considered “thought-provoking and informative” by APREA members who greatly influence the real estate industry in the region.

Most potential investors were surprised to discover that three of the largest malls in the world are found in the Philippines, the 12th largest country in the globe. These are: SM City North EDSA, SM Mall of Asia and SM Megamall. The top two largest malls are in Dongguan and Beijing in China. Others in the top 10 are in Dubai, Alberta, Istanbul and Kuala Lumpur.

Investors also expressed interest in the surge of international tourist arrivals, which has driven the future supply of hotel rooms in Metro Manila. Between 2011 and 2015, 4,500 hotel rooms are targeted for completion – with another 5,500 more proposed but with unconfirmed completion dates. In 2010, Metro Manila counted close to 15,000 hotel rooms.

The Philippines’ strong domestic tourism also nudged investors to reconsider the opportunities offered by the country, said Manuel. The number of passengers on domestic flights increased by 12.28 percent to 16.56 million in 2010, according to the Civil Aeronautics Board (CAB).

“Investors were quick to see that the Philippines has done a tremendous job in growing its real estate sector – despite whatever political and social setbacks it may have experienced in the past few years,” according to Manuel.

Manuel observed: “There is money flowing in the region. We have the demographics to attract more investments. Our numbers are still bound to improve. To maximize these opportunities, we simply have to be more persistent in explaining our growth story.”