JLL: PH property sector remained upbeat for H1 2019
Cebu, Davao and CALABA join Metro Manila as major focus points of investors
The first half of 2019 was optimistic for the Philippine real estate industry, and the future only continues to look good. JLL Philippines, the country’s premier real estate consultancy firm, sees the continued growth of the real estate sector in the coming years, with Metro Manila as the focal area of the current and future real estate attention and movement.
JLL has also noticed a noticeable surge in property interest and activity in provinces outside Metro Manila, specifically in the Cebu, Davao, and CALABA (Cavite, Laguna, Batangas) regions.
Metro Manila’s property outlook for the next few years remains positive for the office, residential, retail, and hospitality property sectors.
Offshoring and outsourcing (O&O), online gaming and tourism drive and influence demand for all types of real estate classes in Metro Manila albeit uncertainties rising in recent periods. In Q2, expansion of pharmaceutical, food and beverage (F&B), fashion and skin care companies supported growth of real estate.
Supply for all property sector continues to grow as developers and investors try and take advantage of a healthy real estate market. Vacancy rates in Metro Manila remain low and manageable across all sectors while rates vary depending on location, but still remain reasonable.
Overall boom in METRO CEBU
Cebu City, Lapu-Lapu City and Mandaue City together make up Metro Cebu. The Metro Cebu property market is currently experiencing a boom across all sectors.
In Q2, O&O firms, English as a Second Language (ESL) schools, online gaming operators, tourists, F&B companies, and the Meetings, Incentives, Conventions, and Exhibitions (MICE) market were all demand drivers that have caused significant growth in the Metro Cebu real estate market.
Local developers lead many of the current builds in Metro Cebu but major developers dominate the share for upcoming developments, indicating great desire to enter the Cebu property market.
Cebu City enjoys the bulk of real estate action; Mandaue City mainly benefits from the completion of residential developments in Mandani Bay; and Lapu-Lapu City will lead in the share for upcoming supply in the hospitality sector.
Supply increase across all property sectors in DAVAO
Davao City is expected to have a big increase in the supply of a wide range of property in the near future.
Ongoing builds in the Agdao, Buhangin, Talomo, and Poblacion districts—mainly driven by O&O firms; serviced offices; local and foreign students, OFW and local investors; expansion of brands with existing operations; and improving tourism performance should lead to a rise in supply across all property sectors of Davao City.
Industrial lands in CALABA
The CALABA region will mainly benefit from the future developments of industrial lands. The completion of AG&P special economic zone 2 in Batangas and the development of more industrial parks in CALABA within the next three years should add up to 446 hectares to existing supply.
The increase in supply is expected to fulfill demand for industrial property driven by the completion of government projects under the Build Build Build Program; the rapid growth of e-commerce leading to the need for improved logistics; and a revitalized manufacturing sector that needs to satisfy a growing domestic consumer base.
Businesses expanding outside Metro Manila
JLL likewise cited several factors that have influenced businesses to expand outside Metro Manila.
The CITIRA Bill seeks to give a superior set of incentives to push investments in the country as well as reduce the corporate income tax rate from 30% to 20%. Businesses that want to create jobs, bring research and technology, and invest in areas that are not as economically developed as major urban cities will be given a superior set of incentives under the TRABAHO Bill.
The delays and problems experienced by businesses in the current processing for Metro Manila economic zone applications are pushing IT businesses to the country side. Apart from this, the Information Technology and Business Process Association of the Philippines (IT-BPM) says there is currently a shortage in PEZA-registered IT-BPM space in Metro Manila which can potentially result to a significant jump in rental rates. This lack of space is expected to swell following Malacañang Administrative Order No. 18, which imposed a moratorium on the approval of IT-BPM ecozone projects in Metro Manila.
There is no question that Philippine Offshore Gaming Operators (POGOS) have been among the major drivers of office space deman. Because of their success, POGOS have even begun expanding their operations outside Metro Manila. While the controversy over POGOS in recent weeks has led to the suspension of the issuance of POGO licenses and the thorough examination of their activities, JLL believes that the office and residential sectors will survive and maintain its growth in the medium to long term even if POGOS exit the country.
U.S. - CHINA TRADE WAR
The positive effects across all indicators that the Philippines has received resulting from the trade war between the U.S. and China has spurred investment opportunities specially in exports, electrical and optical equipment, textiles, and chemicals. Businesses in these areas that are benefiting from the trade war will most likely seek to expand and most industrial properties are located outside Metro Manila.
Further development of various infrastructure projects that will link Cavite, Laguna, and Batangas to neighboring areas, especially Metro Manila, is expected to attract more foreign investments, taking advantage of an improving transportation system and increasing land value.
GROWTH OF E-COMMERCE AND LOGISTICS
The growing transactions built through the internet is significantly becoming a driver of demand for industrial space (i.e. warehouse space) amid the increasing requirement of locators for distribution centers. Consequently, the logistics sector is taking advantage of the advent of e-commerce industry, looking for more expansion facilities.
The continuous growth of the Philippine real estate industry is in no small part due to the government’s programs, projects, and policies. JLL is optimistic about the future and believes that the increase in property interest and activity in regions outside Metro Manila is a positive indicator that the much- needed economic development is well on its way to the provinces.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of nearly 92,000 as of June 30, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com
In the Philippines, JLL has been operating in the country since 1997 as a 100% wholly-owned entity and currently manages about 5.2 million square meters of real estate with a workforce of over 1,100 employees. With more than two decades of local expertise working hand-in-hand with its global legacy, JLL provides to the Philippine real estate market an unparalleled synergy of services with a strong commitment to achieve real estate ambitions through future-ready approaches. For more information, visit jll.com.ph