Colliers sees better prospect for industrial property segment

MANILA, Philippines — The industrial property segment is seen to post robust take up in the next two years as e-commerce and online deliveries continue to grow amid the pandemic, real estate services firm Colliers International Philippines said.

On the other hand, the office, retail and hotel segments are likely to continue to face challenges.

In its Philippine Property Outlook for 2021, Colliers said it sees better prospects for the industrial segment, particularly for manufacturing and logistics next year until 2022, as mall operators and retailers further tap into opportunities in the e-commerce space.

“Mall operators and retailers will likely firm up partnerships with logistics firms and warehouse developers to reach last mile deliveries. This requires an adequate and versatile network of logistics infrastructure,” Colliers said.

Colliers said developers are already tapping into the potential of the sector with transportation and storage accounting for 33 percent or P14.8 billion of total approved foreign investments in the first half of the year.

To maximize opportunities, Colliers said developers would need to adopt Industry 4.0 technologies to modernize warehouses, build more cold storage facilities, explore co-working and flexible warehousing, and convert vacant mall and office spaces into fulfillment centers.

It said some malls have already announced plans to convert retail spaces into micro-warehouses to meet the demand for such from tenants moving into e-commerce.

“Potential locations for these facilities include Quezon City, Manila, Pasig, Makati, Pasay, Muntinlupa, [and] Marikina,” Colliers said.

Of the estimated 825,800 square meters (sqm) of leasable warehouse space in Metro Manila, Colliers said around 30 percent is in Valenzuela.

Meanwhile, around 73,600 sqm are available in Pampanga and 816,100 sqm in the Cavite-Laguna-Batangas corridor.

As for the office segment, Colliers sees a challenging leasing market as Philippine Offshore Gaming Operators have been vacating spaces, while traditional and outsourcing firms are either closing down or streamlining operations.

Colliers expects office vacancy in Metro Manila to rise further to 11.6 percent next year from the 9.1 percent forecast for this year.

Meanwhile, it sees office supply in Metro Manila declining 35 percent to 632,600 sqm next year, from an initial projection of 969,900 sqm at the start of this year due to the pandemic.

Recovery of the office leasing market would depend on the improvement in the general business sentiment and in markets that outsource services to the Philippines.

“Colliers believes that landlords should focus lease negotiations on strategies that support tenants and are responsive to their needs. We see tenants exploring short term (e.g. six month) lease renewals during this period of uncertainty, complementing traditional offices with remote work models,” the firm said.

In terms of the retail segment, Colliers expects take-up to be driven by those engaged in the food and beverage, as well as medical and other essential services from this year until 2022

Colliers said construction of new malls would depend on improved consumer confidence and purchasing power, as well as demand from retailers that would still want to have physical space despite the growing popularity of e-commerce.

The hotel segment is seen to continue to suffer from the pandemic as foreign arrivals are likely to be muted over the next 12 months.

For the residential segment, Colliers expects demand to be driven by mid-income and luxury projects next year.