The hospitality, gaming and retail sectors are opening up opportunities for multinational investors in the Philippine real estate and property scene in 2015, according to CBRE Philippines.
A CBRE report highlighted a steady flow of investments , particularly in gaming and retail, which are new and emerging sectors. It also saw a possible uptrend in the hospitality and office sectors.
But observers in the real estate, property development and construction scene also noted that the planned ASEAN (Association of Southeast Asian Nations) economic integration in 2015 would require more commercial and residential infrastructure for highly urbanized cities within the region, including key cities of the Philippines.
The Chamber of Real Estate and Builders Association (CREBA), the country’s largest organization of key players in the domestic real estate industry, expects the Philippine real estate industry to grow further next year because of the ASEAN integration and the region’s increasing role in global economy.
ASEAN integration will change the economic landscape of the whole region, particularly the real estate market, with the elimination of tariffs on goods and services by a single ASEAN economy. This would theoretically drive consumer spending higher.
The demand for residential spaces adjacent to malls, retail complexes and other recreational spaces would go up.
The influx of investment and elimination of trade barriers will allow each country in ASEAN to enjoy free flow of goods, services, labor and capital.
But CREBA reiterated the country must continue to pursue relevant market reforms in order to be competitive.
Chief among these are possible amendments to foreign ownership restrictions in the Philippine constitution which reportedly hinder the growth of foreign direct investments.
The business process outsourcing (BPO) sector of the Philippines remains the top driver for investment in the country, with demand being sustained by the country’s cost-effectiveness and demographic dividend.
In the last quarter of 2014, vacancy rates in key business districts – Makati, Bonifacio Global City, Ortigas, Quezon City, Pasay, and Alabang – dropped. Overall vacancy rates for Prime and Grade A buildings in Metro Manila slipped from 2.53% to 2.13% quarter-on-quarter.
With demand for office space on an upward trajectory, landlords increased rents to PhP 1,306.08 per square meter for Prime office space and PhP 898.87 for Grade A in Makati CBD; PhP 848.34 per square meter in Bonifacio Global City; PhP 604.71 per square meter in Ortigas; and PhP 606.84 per square meter in Alabang. Meanwhile, rates in Quezon City are at PhP 627 per square meter and in Pasay at PhP 650.47 per square meter.
“Even with the increase in rental rates across all business districts, the good news remains that investors are willing to pay for the quality and value that they can get in the Philippines,” shared Rick Santos, Chairman, Founder, and CEO of CBRE Philippines.
In response to this demand, developers are augmenting supply through their projects within and outside the metro’s business districts.
Parallel to the continued strengthening of the Philippine BPO sector is the heightened investor interest in the ‘sunshine’ industries of hotel & leisure, gaming, and retail.
Hotel and Gaming Sector
With the upbeat performance of Philippine tourism, interest has likewise increased for investments. Inbound tourists hit the 4.7 million mark in 2013 and are expected to be surpassed when the full 2014 results are released. Visitor receipts accelerated by 7.14% to USD 3.895 billion. In October, it rose by 8.02% to USD 333.10 million compared to last year’s USD 308.38 million.
“The Philippines, with its world-renowned beaches and bustling commercial activity, is being noticed on the global stage,” said Santos. “Through the combined efforts of public and private organizations and partnerships, the newly-discovered goldmine of the hospitality and tourism sectors continue to attract large investments into the country.”
Luxury and budget hotel brands are aggressively competing for market shares in key tourist destinations in the Philippines. These include World Hotel and Residences (Makati), Shangri-la Hotel (Bonifacio Global City), Grand Hyatt (Bonifacio Global City), GoHotel (Paranaque), Conrad Hotel (Pasay), Hotel101 (Pasay), Savoy Hotel New Port City (Pasay) and Microtel (Pasig).
Meetings, incentives, conventions, and exhibitions (MICE) activities are likewise expected to spur in additional demand for supply. Revenue from MICE activities is expected to grow, especially with the entry of new developments such as the City of Dreams Resort Complex, Philippine Arena, Aseana City, PAGCOR City, Circuit Makati, Marriot Grand Ballroom, Resorts World Bayshore, and the Iloilo Convention Center.
On top of MICE development in the Philippines, the emergence of the gaming sector is one of the most exciting activities currently happening in real estate. Industry analysts are expecting double-digit revenues as licensed casino operators – Travellers International Hotel Group, Bloombery Resorts Corp., Melco Crown Philippines Resorts Corp., and Tiger Resorts – come online.
“The gaming sector of the Philippines, when developed, is expected to rival that of Macau and other Asian countries. The aggressive take-up of these players only reflects the bullish outlook on the country’s ability to meet and sustain the demand. This is the ‘sunshine’ industry of the country today,” shared Santos.
Shopping Brand Haven
As the hotel, leisure, and gaming sector are up to speed, the Philippine retail industry remains upbeat. Its doors remain open for both local and international brands vying for market share. Strengthened interest in tourism has encouraged retail investors to enter and expand in the country.
Malls such as Megamall, Estancia Mall in Capitol Commons, Robinson’s Place Las Pinas, and City of Dreams Manila add retail space to occupiers.
Taking advantage of the ‘retail-tainment’ concept, developers are tailoring their projects to integrate residential and office spaces into one community. The incorporation of these sectors reflects the strong activity in the business process outsourcing (BPO) industry and overseas remittances.
Overall, the Metro Manila retail market is seen to remain strong and stable for the remainder of the year empowered by the expanding BPO industry, OFW remittances, boosting tourism and growing middle-income market.
Ending 2014 on a positive note and with the sustained demand across all sectors, the Philippine real estate industry now looks to a stronger 2015 especially with the upcoming ASEAN integration and national elections.
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