PHL economy seen as region’s laggard on virus spike, slow vaccinations
According to Moody’s Analytics Chief APAC Economist Steven Cochrane, the economic recovery of the Philippines is lagging behind the Asia-Pacific region amid the surge in fresh COVID-19 cases, resumption of strict lockdowns in Metro Manila, and the severe shortage of vaccines within the country. While Philippines may see strong growth rates this year partly due to the very low base effects, it is still considered at "greatest risk" of underperforming due to the recent spike in COVID-19 cases. Meanwhile, Mainland China, Taiwan, Vietnam, and New Zealand are leading Asia-Pacific's economic recovery. Singapore and Malaysia are also seen to have the best performance in the Southeast Asian region.
The impact of the pandemic has been evident in the property sector. In 2020, the strict lockdowns and project delays have resulted in slower leasing activities for office buildings. Colliers recorded a net absorption of –182,300 sq metres (-2.0 million sq feet) in 2020, first time we posted a negative net take-up on an annual basis. Meanwhile, condominium prices also dropped by 13.2%. The country’s economic managers, multilateral and credit rating firms are now projecting an economic rebound of between 5.5% to 7.9%, slightly lower than their initial forecast of between 5.9% to 9.6% due to the recent spike in the number of COVID-19 cases in the country. Colliers believes that demand for offices and residential units in 2021 will likely hinge on the pace of COVID-19 inoculation, low interest rates and Overseas Filipino Worker (OFW) remittance inflows.
AyalaLand Logistics Holdings acquires cold storage facility in Laguna Technopark
AyalaLand Logistics Holdings Corp. acquired Technofreeze, a cold storage facility located in Laguna Technopark, and the land where it stands for a total of PHP408.8 million (USD8.58 million). Technofreeze serves companies by storing various products such as processed meat as well as dairy and ice cream. The storage facility has 17 cold storage rooms that can keep the temperature for up to -25 °C with 4,000 pallet positions. It also has 3 processing rooms with adjustable temperature of 0 to 25 °C, 4 dry storage rooms with 1,600 pallet positions, 2 blast freezers with a combined capacity of 25 tons, and many office spaces.
Data from the Philippine Statistics Authority (PSA) show that the manufacturing, transportation and storage sectors covered 65% of total approved investments in 2020, from only 11% in 2019. Colliers believes that bulk of these investments will likely be channeled onto the Cavite-Laguna-Batangas (CALABA) industrial zone. Colliers also projects that the healthy demand for the warehousing sector will likely be driven by the growth of e-commerce and the emergence of a lockdown economy. The Board of Investments (BOI) has launched a Cold Chain Industry Road Map that aims to increase cold storage capacity by 10-15% annually or 50,000 pallets every year. This growth should lead to a PHP20 billion (USD416.7 million) industry by 2023. Colliers recommends that developers continue modernizing their warehouse facilities, invest in the cold-chain sector in to capture the growing demand for perishable food items, groceries and the vaccines for the COVID-19. We also recommend industrial park developers to consider parcels of land in alternative locations North and South of Luzon as the upcoming infrastructure projects should raise the attractiveness of these locations for manufacturing and logistics investments.
More firms expanding, hiring in Q2
BSP’s Business Expectation Survey (BES) reported an increase in the percentage of businesses in the industry sector with expansion plans as it rose from 16.9% for the first quarter to 20.6% for the second quarter. Overall, the percentage of businesses with expansion plans slightly declined from 28% to 27% for the next 12 months according to Redentor Paolo Alegre, a senior director in BSP. Meanwhile, the employment outlook index showed an improvement as it increased for both the second quarter and the next 12 months. The average capacity utilization in the industry and construction sectors also increased for the first quarter to 70.1% from 67.9%.
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The overall improvement in businesses’ optimism for the quarter has been evident in the country’s latest labor statistics. Data from the Philippine Statistics Authority (PSA) show that unemployment rate as of February 2021 reached 8.8% from the peak of 17.7% in April 2020. Meanwhile, those employed in the information and communications technology, administrative and support, professional services, real estate and financial and insurance activities have increased to about 3.2 million in February 2021 from only 1.8 million in January 2020. In our view, the increased employment from these sectors will likely partly contribute to more office space absorption across the capital region. In our opinion, the economic forecasts of credit rating firms, multilateral and government agencies of between 5.5% to 7.9% in 2021 should aid business recovery and drive demand in the property sector.