Makati, August 15, 2017 – The Philippines is becoming a key real estate investment destination in Asia. Gross yields for property investments in the country are among the most attractive in the region as they are propelled by a robust macroeconomic backdrop. This encourages foreign companies, particularly Japanese, to be more aggressive in partnering with local firms for various residential and retail projects.
The Q2 2017 Global Cap Rate Report released by Colliers International Valuation and Advisory Services (CIVAS) reveals that office yields in prime locations across Asia range from 3.8% to 5%. Shanghai recorded a gross yield of 5% followed by Tokyo’s 4.5%, Singapore’s 4%, and Hong Kong’s 3.8%. These were trumped by the Philippines’ more attractive yield of 7.7%.
Meanwhile, the Philippines’ residential yield of 5.5% is also among the highest in the region. The country’s yield outpaced Tokyo’s 2.7%, Singapore’s 2.1%, and Hong Kong 2%. Only Vietnam recorded a higher yield (5.7%) than the Philippines.
These attractive yields are enticing Japanese property firms to be more aggressive in investing in the local real estate sector. Among the major Japanese real estate players that are expanding footprint in the country include Hankyu Realty Co., Ltd., Mitsui Fudosan, Nomura Real Estate Development Co., and Isetan Mitsukoshi.
“Local and Japanese companies mutually benefit from these joint venture projects,” said Ieyo de Guzman, Colliers International Philippines’ Deputy Managing Director for Investment Services. “While Japanese firms are enticed by high yields derived from Philippine projects, local developers gain by being vouched for by prominent Japanese brands known for their precision and high architectural and engineering standards.”
Hankyu Realty Co., Ltd. has teamed up with P.A. Alvarez Properties for the development of a PHP656-million affordable housing project in Dasmariñas, Cavite. The 37-ha project includes the construction of more than 800 housing units. Cavite is an ideal location for residential projects as its population is growing by an average of 3.4% annually, double the national average. Per capita income in the Southern Luzon region, where Cavite belongs, has risen by 4.7% per annum over the past two years. Among the key drivers is the sustained flow of overseas Filipino workers (OFW) remittances, with Southern Luzon being one of the major sources of migrant workers. In 2016 alone, the region’s OFW deployment grew by 7%. Moreover, sections of Cavite remain as a support community to the country’s capital, thus sustaining the demand for affordable residential projects. Aside from Cavite, P.A. Properties is also exploring other viable provincial locations for residential projects. According to their president, Jonathan Lu, “We plan to go further the shore of Luzon and try to tap opportunities in the Visayas and Mindanao,” and added that the project with Hankyu Realty would help address the more than five million housing backlog in the country.
The PHP9-billion Arton project in Katipunan, an 80-20 venture between Rockwell Land and Mitsui Fudosan, covers the construction of three residential towers that will feature a total of 1,700 units. The Katipunan area has become an extension of satellite communities such as Eastwood, Bridgetowne, and ArcoVia which are all located along C5 road. The demand for residential projects in the area is primarily driven by the presence of schools like UP, Ateneo and Miriam. Katipunan is an attractive location for property developers as finding a substantial parcel of land to develop for residential projects within Metro Manila remains difficult. The property acquired by Rockwell and Mitsui appeals to both end-users and investors.
Meanwhile, Federal Land is partnering with Nomura Real Estate Development Co. Ltd. and Isetan Mitsukoshi Holdings Ltd. for the construction of a PHP20 billion retail and residential complex in Bonifacio Global City (BGC). Four residential towers will be developed within Federal Land’s 10-hectare Grand Central Park development which will be complemented by a mall that will feature Japanese food and beverage (F&B) and fashion brands.
“Over the near to medium term we see the entry of more international developers given the Philippines’ rising status as a real estate investment hub in the region. Aside from the Japanese companies’ partnerships with P.A. Alvarez, Federal Land and Rockwell Land, several property firms from other parts of Asia have expressed interest to invest in the Philippine real estate sector and team up with local developers,” de Guzman added.
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