We are pleased to announce that the 2nd quarter 2017 property market report is now available. Commercial real estate services company Colliers International, in a recently released report, identified key issues and opportunities in the Philippine property market particularly in office, residential, hotel and industrial sectors.
Metro Manila office net take-up totalled 190,000 sq m (2.0 million sq ft) in 2Q 2017. The diversified tenancy mix continued in 2Q with a slight improvement seen in BPO demand. From a share of 21% in total transactions in 1Q, BPO demand rose to 31% by the end of June. Offshore gaming firms represented 30% while the remaining 39% came from traditional companies. The strong demand, primarily noted in Manila Bay Area and Fort Bonifacio, has kept vacancy below 5%. Amid the limited supply of Philippine Economic Zone Authority (PEZA)-proclaimed buildings, Colliers believes that there are opportunities for developers and tenants. Developers who have IT parks are less affected by the delays because buildings in IT parks are automatically PEZA-accredited. We recommend that developers take advantage of the situation by aggressively marketing their PEZA-proclaimed buildings. Other developers with non-PEZA buildings may also tap into the growing demand from traditional companies. Meanwhile, we advise BPO tenants to close deals quickly in order to avail themselves of incentives in a tight market.
The Metro Manila condominium market sustained its growth in 2Q 2017 as take-up in the pre-selling market reached over 23,000 units. The growing demand for affordable and mid-income projects has seen development expand to areas outside major CBDs. Colliers sees this trend redefining the secondary market in CBDs, characterized by declining rents and plateauing capital values as condo users are given wider options. In response, we recommend that developers take advantage of the opportunity by building projects catering to the affordable and mid-income segments. We encourage developers to differentiate their products by providing lifestyle-oriented amenities, unique retail options, and recreational elements within their developments. On the other hand, we recommend potential buyers, investors, and tenants to consider areas outside CBDs given that these locations offer competitive rents and prices, as well as better capital appreciation potential. The availability of developable land and the benefit of future infrastructure improvements make these locations attractive.
Foreign arrivals continue to grow despite safety and security issues as well as the imposition of martial law in the Mindanao group of islands. We still expect 10% growth in international arrivals in 2017 as we see the likely slowdown in the historically slack 3Q being offset by the traditionally strong 4Q driven by foreigners and Overseas Filipino Workers (OFWs) who spend holidays in the Philippines. The thriving domestic tourism, fuelled by millennial spending and the growing popularity of "staycations", helps sustain hotel occupancy in Metro Manila. This compels developers to build more three and four-star hotels in Metro Manila and other urban areas outside the capital. For developers, we recommend the construction of more three- and four-star hotels and meetings, incentives, conferences, and exhibits (MICE) facilities in Metro Manila and provincial locations where road networks and air transport projects are being developed. Given the rising competition among affordable hotels, we encourage operators to be more proactive in offering innovative loyalty programs to their regular clients.
The Philippines continues to attract more foreign and local investments with manufacturing being the major recipient of fresh equity investments. The Cavite-Laguna-Batangas industrial corridor should benefit from the top conglomerates' foray into manufacturing and the planned construction of major infrastructure projects. The development of industrial parks within major townships in Northern and Central Luzon should entice industrial investors to open facilities in the area. Colliers encourages investors to explore the option of establishing operations in industrial parks located within townships as these integrated communities are near key air and road infrastructure projects which ease the process of doing business; and serve as catchment areas for skilled manpower and a continuously rising consumer base for manufactured goods. Meanwhile, we encourage developers to look at other feasible locations for industrial park development. In the Northern Luzon area, we consider Bataan, Tarlac, and Pangasinan as among the most viable options.
Learn more on what transpired during the second quarter by downloading the links below.
2Q 2017 Office Report
2Q 2017 Residential Report
2Q 2017 Hotel Report
2Q 2017 Industrial Report
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