Industrial, office segments to lead real estate recovery

MANILA, Philippines — The industrial or logistics and office segments are expected to lead the recovery of the country’s property sector amid the coronavirus disease 2019 (COVID-19) pandemic, real estate services firm Colliers International Philippines said.

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Joey Bondoc, senior manager for research at Colliers International Philippines, said in a webinar the logistics and office segments, which have shown the highest resilience, would be leading the recovery of the property sector.

“One of the bright spots really is the growth of the logistics sector because the growth of e-commerce has been tremendous during this pandemic and lockdown and it has enticed a lot of locators to modernize warehouses and even expand industrial logistics footprint,” he said.

While data from the Philippine Statistics Authority showed foreign investments registered with investment promotion agencies declined 36 percent to P29.4 billion in the first quarter from P46 billion in the same period last year, he said the firm is still optimistic for the industrial segment as the investments would benefit industrial parks and or warehouses in Cavite, Laguna and Batangas.

He said attracting firms moving out of China would also be beneficial for the industrial segment.

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“A lot of manufacturers are moving out of China and we hope the Philippines can capture a lot of these investments after the pandemic because it will translate to greater industrial and warehouse absorption in key industrial sites such as CALABARZON as well as Clark and of course, this will bode well for the industrial parks of developers in Northern and Central Luzon, as well as New Clark City especially manufacturing investments into light manufacturing such as food and beverage and packaging,” he said.

By the end of the year, Colliers expects the vacancy rate to rise slightly to 5.7 percent due to new supply, but this should decline starting 2022 as new manufacturing activities start.

The Department of Trade and Industry is targeting to attract 135 firms moving out of China to set up complementary facilities in the Philippines.

With the central bank’s projection of economic recovery starting in the fourth quarter of the year, Colliers is hopeful this would be supported by the expansion of firms which would lead to greater demand in the office segment.

Bondoc said there has been slower demand for office space from Philippine offshore gaming operators (POGOs) due to travel restrictions, and from some business process outsourcing (BPO) firms on a wait-and-see mode given the pandemic.

With slower demand from POGOs and BPOs, Colliers expects Metro Manila office space vacancy to reach 5.3 percent, and for take-up to reach 386,000 sqm for this year, significantly lower than the initial 900,000 sqm estimate.

In terms of new office supply, Colliers estimates this to reach 532,000 sqm, about 50 percent of the initial estimate of 1.07 million sqm, due to manpower constraints brought about by the lockdown to contain the spread of the virus, as well as slower take-up.

Even with the pandemic, he said some BPOs have still expanded and taken up office space to meet the requirements for social distancing.

With only about 139,100 sqm of available Philippine Economic Zone Authority (PEZA) – accredited space in Metro Manila from this year until 2022, Bondoc said having more PEZA-proclaimed spaces would be crucial in attracting BPO firms.

BPO firms need to locate in PEZA-proclaimed spaces to enjoy tax perks.

Apart from absorbing available PEZA spaces, Colliers expects greater take-up by BPOs of office spaces in fringe and non-core locations for the remainder of the year and until next year to minimize costs given market uncertainties.