The (ASEAN economic integration in 2015) would require more commercial and residential infrastructure for highly urbanized cities within the region including key cities of the Philippines, according to property developers.
Rick Santos, chairman of CBRE Philippines, said he expects the Philippine real estate industry to grow further this year because of the ASEAN integration. and the region’s increasing role in global economy.
Speaking at a forum held in Makati City this week, Santos said the ASEAN integration will change the economic landscape of the whole region, particularly the real estate market.
“Residential, commercial and retail developers, which will be exposed to international market, will expand their operations and acquire properties inside and outside the country,” he said. “Foreign investors and corporate executives with local operations in the country will look for residential spaces for a place to stay.”
Santos also explained that the elimination of tariffs on goods and services by a single ASEAN economy would drive consumer spending higher.
“The demand for residential spaces adjacent to malls, retail complexes and other recreational spaces would go up, and will likely increase the already healthy real estate market,” Santos said.
The influx of investment and elimination of trade barriers will allow each country in ASEAN to enjoy unimpeded and free flow of goods, services, labor and capital.
Speed up reforms
But several speakers at the forum reiterated the need to push for relevant market reforms in order to remain competitive.
Foreign ownership restrictions, for example, continue to hinder the growth of foreign direct investments, thus the need to improve the business environment in the country in order to attract more investors.
Local real estate investors have also been pushing for the passage of a bill that will consolidate the function and powers of major housing and urban agencies of the government to address the needs of both consumers and developers.
With the upcoming ASEAN integration, property players “should work together to unlock strategic approaches to keep the domestic property sector afloat as multinational players enter the already stiff competition in the country’s real estate market, according to the organizers of the forum.
Santos lauded the local real estate market’s continuing growth momentum in the first quarter of 2015. Strong macroeconomic fundamentals, low inflation environment, good business climate, and projected increase in government spending were cited for the industry’s expansion.
“There is no let-up in the growth of the property sector. The supply and demand across the office, residential, retail, and industrial markets remain positive, especially with the upcoming ASEAN integration,” said Santos.
With revenues growing to 18.7 percent from the previous year, Business Process Outsourcing (BPO) drove the Philippine office market, resulting in strong office space take-up. The attractiveness of the BPO business environment in the country encouraged foreign investors to expand into the different business districts, with Manila registering vacancy rates of 3.28 percent, and average lease rates of 1.45 percent quarter-on-quarter.
The growth of the BPO industry likewise beefed up activity in the residential sector, as local income rose. Overseas Filipino Workers (OFWs) remittances helped drive the market. Metro Manila placed fourth in the residential apartment prospects among the 22 urban centers being considered by the Urban Land Institute in the first quarter.. This led to robust sales of vertical subdivision units. Despite the robust demand, developers are vigilant on the demand and supply movement.
Real estate players are also keener on developing mixed-use residences within and in the outskirts of the country’s central business districts. Notable projects include McKinley West by Megaworld and Arca South by Ayala Land.
The industrial sector got a boost from the country’s strong economic growth and robust foreign demand, attracting more manufacturing firms into expanding in the Philippines. This growth was riven by lower input costs and cheaper labor, according to a study released by CBRE Asia Pacific. Profitable operations of manufacturing firms housed in the country also boosted industrial opportunities and operations.
Efforts from public and private entities are also encouraging developers to expand their operations in the country. This is evidenced by the first quarter entry of foreign-based companies who are either relocating or expanding their manufacturing and assembly facilities within the country.
Upbeat retail scene
The retail sector remains one of the most upbeat markets in Philippine real estate. The expansion of the BPO industry and increase in OFW remittances played a hand in this development. Income sources particularly local employment and OFW remittances, which are the backbone of consumer spending, did not slacken, given the steady expansion of the outsourcing and offshoring sector and the stable increase in the deployment of overseas Filipino workers. These, along with the heightened purchasing power of Filipinos, put the Philippines in the radar of foreign retailers.
Business opportunities encouraged global brands to set up shop in the country. In response, expansion of malls and the opening of new ones can be seen across business districts.
The emergence of the gaming industry in the Philippines is also opening up more investment opportunities in the sector. Luxury brands have opened their doors to the market. Meanwhile, the strengthening of the tourism industry is also boosting the activity in the sector.
Overall, the Philippine real estate market sustained its growth in the first quarter of the year. So long as this continues, Santos said the sector is all set for the upcoming ASEAN integration.
“With a strong real estate market, the Philippines will not only be open to more opportunities but ultimately, lead the other ASEAN countries in terms of growth and development,” Santos evinced.
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