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Room to Run

The Philippine Property Industry Offers Investors New Economic Space
 
Boasting investment grade ratings from all major agencies and strong annual GDP growth, the Philippines’ property industry has been performing spectacularly across all sectors and
the rally looks set to continue for the decade to come.

“The property sector in the Philippines is at the forefront of Philippine growth in the medium and long term,” said National Economic and Development Authority (NEDA) chief Arsenio Balisacan. “Good macroeconomic fundamentals, low interest rates, the thriving services and BPO sector and the upcoming ASEAN Economic Community are all key drivers that everyone should look out for.”

The momentum is not set to end anytime soon with the sector benefiting from a positive economic outlook and the projected expansion of the outsourcing industry within the next five years.

“The Philippines was [previously] a laggard in Asia with regard to property development,” noted SM Investments Corporation (SM) Senior Vice President for Investor Relations and Corporate Communications, Cora Guidote. “That said, we are [now] in the early stages of a sustained property cycle where all forms of property development have much room for growth.”

Currently operating some 58 shopping malls across a total gross floor area of over 7.5 million square meters, nationwide, SM is a leader in the retail, property and banking industries and it is in the midst of dynamic expansion.

“There are enormous opportunities still available in these sectors particularly in a host of emerging cities outside of Metro Manila,” Ms. Guidote stated. “Our growth in the past had mostly been in Metro Manila which accounts for only 13% of Philippine population. As such, more of our resources in the next five years will find their way into the provincial areas, especially in the Visayas and Mindanao regions.”

This diversification into rural infrastructure is complemented by SM’s ever-increasing retail presence catering to a middle-class that is set to have grown 72% by 2020 according to Nielsen Philippines.

“In retail, we are aggressively growing our food retail stores at a rate of 40 to 50 stores per year, excluding the minimarts which we are growing 8 to 10 per month. The malls will grow 5 to 6 malls per year,” said Ms. Guidote, suggesting strong demand. “In the residential business, we plan to launch 12,000 to 15,000 units per year, while we plan to launch one office commercial building per year.”

With a booming IT-BPO sector and resilient overseas remittances fostering a young, burgeoning middle class poised to enter a ‘demographic sweet spot’, residential and commercial real estate are witnessing upwards movement not seen in 40 years with residential and office properties prime movers.

And while the medium term forecasts strong continued demand for CBD office space in Metro Manila, it may be the previously underappreciated southern Visayas-Mindanao corridor, home to nearly one quarter of the country’s GDP, where even stronger earning potential can be found in the years to come.

Look for heightened ASEAN integration to boost attractiveness as an investment destination with demand for property increasing across the board.

Thanks to its  strategic location in the world’s fastest growing region, straddling the sea lanes of the heart of global trade, Philippines’ burgeoning manufacturing sector means industrial properties are often an untapped investment opportunity. Savvy buyers can find great bargains outside prime urban areas, ideal space for factories, warehouses and logistics hubs.

With the Philippines’ tourism now experiencing a rapid upswing, accommodation is still largely under-supplied. As more destinations gain popularity and domestic and international markets grow, more beds are needed.

The spotlight is now on the Philippines as overseas investors consider when and in what sector of the real-estate market to invest within the Southeast Asian nation. This is also in line with the government’s ambition to attract more foreign direct investment (FDI) by developing ties with growing powers in the region such as China. Philippines-based stock brokerage firm, Papa Securities has predicted that through Chinese investment anywhere between $450 million to $680 million in annual FDI.   

With a burgeoning middle-class that ranks second in the world in consumer spending according to the latest Nielsen Global Survey of Consumer Confidence, The Philippines’ young and vibrant economy is quickly developing into a magnet for both property developers and buyers – the skyline is rapidly changing from luxury green suburb houses to smart factories that are gradually positioning the island nation as a hotbed for real estate over the next decade.

Date: 
Tuesday, October 25, 2016
Source: 
Wall Street Journal By Brandon Zatt / Advertorial