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Market Intelligence | Philippines January 13, 2022

Industrial real estate, Ecozones, Retail real estate

This week, Colliers Research provides insights on the planned expansion of multinational firms in the Philippines and why it bodes well for the industrial sector; the signing of RA 11595, which lowers the minimum paid-up capital requirement for foreign retailers and its effect on the recovery of the retail sector; and lenders’ exposure to the real estate sector slightly falling in Q3 2021.

3 big multinational firms plan ecozone expansions

SUMMARY

Three multinational electronics firms – namely, Amkor, Murata, and Samsung – are planning to expand their operations in the country’s economic zones. The Philippine Economic Zone Authority (PEZA) also held meetings with Taiwanese firms, such as Yeonho Electronics, and Taiwanese investors, including Furukawa Group, the Taiwan Economic and Cultural Office, and YFC. These investors are eyeing ecozones in Cavite, Bulacan, and Bataan.

RESEARCH VIEW

Colliers has observed a slow rebound in manufacturing activity in the country. Data from IHS Markit show that the Philippine Manufacturing Purchasing Manager’s Index (PMI) rose to 51.8 in December 2021, up from 51.7 in November. IHS Markit attributed this improvement to the rise in domestic demand and a slight uptick in manufacturing output. Colliers believes that further expansion of industrial activities will likely hinge on Covid-19 inoculation, improvement of the country’s infrastructure backbone, and continued inflow of foreign investments through the implementation of legislative measures, such as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.

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Duterte lowers required paid-up capital for foreign retail enterprises
   

SUMMARY

President Duterte signed into law Republic Act No. 11595, amending the Retail Trade Liberalization Act. Under the measure, the minimum paid-up capital requirement for foreign retailers planning to do business in the Philippines is lowered to PHP25 million from the previous PHP125 million. The Act also states that foreign retailers that have more than one physical store should have a minimum investment per store of at least PHP10 million.

RESEARCH VIEW

In Q3 2021, Colliers saw retail vacancy rising to 14.8% from 14% in Q1 2021. We see vacancy rising to about 17% in 2022 due to substantial new supply and tepid demand. Colliers believes that further liberalizing retail trade in the Philippines will likely be beneficial to the retail sector as the entry of foreign investors should help mall operators fill their vacant spaces. This should also allow mall operators to diversify their offerings and promote competition among retailers, which should benefit consumers. Despite the pandemic, Colliers saw the entry of foreign retailers such as London-based fashion brand, COS, as well as Swedish furniture and home accessories brand, IKEA.

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Lenders’ exposure to real estate falls as of end-Sept.

SUMMARY

Data from Bangko Sentral ng Pilipinas (BSP) or central bank show that banks and trust departments have a cumulative 22.18% exposure to the property sector in Q3 2021, slightly down from 22.2% in Q2 2021. Central bank data also show that loans and investments to the real estate industry reached PHP2.8 billion in Q3 2021, up 8.3% YOY. Meanwhile, home prices rose by 7.3% YOY in Q3 2021, ending two consecutive quarters of decline. The higher prices were attributed to the uptick in demand for condominium units and townhouses.

RESEARCH VIEW

Data from the central bank show that consumer outlook will recover to 35.7% in the next 12 months after dropping to -19.3% in Q4 2021. Meanwhile, business outlook will also improve to 68.6% in the next 12 months from 43.7% in Q4 2021. Colliers believes that the improvement in consumer and business confidence should boost residential demand in 2022 backed by the government-projected economic recovery of between 7% and 9%, sustained overseas Filipino worker (OFW) remittances, and competitive mortgage rates.

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