PHILIPPINE PROPERTY MARKET REPORTS

We are pleased to announce that the 3rd quarter 2017 property market report is now available. Global real estate services company Colliers International, in a recently released report, identified key issues and opportunities in the Philippine property market particularly in the office, residential and retail sectors.


OFFICE
Net take-up for the first nine months of 2017 totalled 356,000 sq m (3.8 million sq ft), still on track to reach 550,000 sq m (5.9 million sq ft) of office space absorption for the full year 2017. Demand for the remainder of the year should be robust, driven by requirements from offshore gambling and traditional companies. Interestingly, Metro Manila vacancy is inching up. Vacancy has breached the 5% mark as of the end of 3Q 2017, and it appears that it will be the first time it will stay above 5% in the last seven years. The two-fold impact of historical highs in supply and notable demand headwinds have started moving the office sector from a landlord’s market. The most pronounced outcome is the shift in the tenancy mix arising from the BPO slowdown. Furthermore, with supply from 2018 to 2020 projected to average 900,000 sq m (9.1 million sq ft) annually, we expect developers to make the necessary adjustments -- particularly if the demand headwinds persist. Developers will likely turn off the tap and pare down supply over 2019-2020, as they did in the aftermath of the Global Financial Crisis (GFC) of 2008-2009. Meanwhile, in the short term, we propose that they focus on demand from traditional companies, as well as maximise the potential of offshore gambling while demand still exists.

RESIDENTIAL
Fully-developed CBDs continue to add supply as fringe locations emerge as viable alternatives. Consequently, vacancy across submarkets have gradually risen. Concerns about oversupply has appeared, given declining rental yields and the huge influx of condominium supply in Metro Manila which peaked in 2012, but dragged on until recently. However, Colliers finds three key determinants that assuage fears of an oversupply, namely: (a) the level of condominium take-up is considerably lower than household formation; (b) the remaining inventory life across segments is well-within developers’ construction periods; and (c) condo prices continue to increase, characteristic of a market far from any correction. Considering these points, Colliers recommends that developers continue to cater to the growing demand from buyers and tenants, highlighting product advantages including location, structure, finishing and retail presence. Buyers and tenants should keep a keen eye on construction quality, capital appreciation, and rental growth potential as differentiating factors in a market with a huge level of upcoming supply.

RETAIL
Vacancies in malls across Metro Manila have continued to rise. Colliers recommends that developers use this situation as an opportunity to improve tenant mix and attract new types of retailer. We believe that the proposed liberalisation of entry of foreign retailers is a step in the right direction as more foreign brands can now enter the food and beverage (F&B) and home furnishing categories which are dominated by local players. Mall operators and retailers should adopt the click-to-brick strategy and start complementing their physical stores with the effective use of online selling and social media platforms. Retailers should consider tapping transportation apps such as Uber and Grab for their deliveries given the worsening traffic in Metro Manila, exacerbated by holiday-induced spending. We believe that more Filipinos will be encouraged to transact online if operators and retailers tighten the security of their online sites, expand the use of mobile wallets, and charge minimal or even waive delivery fees. To boost consumer traffic, we encourage malls to provide more lifestyle amenities and technology-driven customer experiences that generate a sense of destination.

Learn more on what transpired during the third quarter by downloading the links below.

3Q 2017 Office Report

3Q 2017 Residential Report

3Q 2017 Retail Report


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Colliers International | Manila 11F Frabelle Business Center, 111 Rada Street Legaspi Village, Makati City 1229 Philippines | Tel: +632 888 9988