7 Trends in Philippine Real Estate in 2020
The beginning of 2020 has been marked by a series of unexpected events that continue to affect the global economy. Despite the impact of the coronavirus-2019 (Covid-19) pandemic and downturn in international stock markets, the Philippine real estate industry remains optimistic, according to leading real estate service company Santos Knight Frank.
It has identified the seven key trends that will be shaping the real estate industry this 2020.
The year for REIT’s
More property companies have expressed interest in real estate investment trusts (REIT’s) after regulators unveiled the revised rules in January. Property giant Ayala Land Inc. recently filed its application for its own REIT subsidiary, AREIT, while DoubleDragon
Properties Corp. is looking at raising P11 billion annually over a six-year period via REITs.
“REITs bring about a significant opportunity to democratize the Philippine property market, allowing the small investor to participate in high-value real estate assets alongside major corporate institutions. REITs have the power to sustain long-term growth for the Philippine economy through investments,” said Rick Santos, Santos Knight Frank chairman and chief executive officer.
According to Kash Salvador, Santos Knight Frank associate director for investment and capital markets, REITs are seen to drive an increase in real estate activities all over the Philippines in the coming years. REIT-generated capital will enable the real estate sector to expand outside Metro Manila and generate more jobs.
Healthcare, animation, and game development drive BPO growth
Santos Knight Frank believes that while business processing outsourcing (BPO) companies will still pursue expansion within Metro Manila, they may still move outside the metropolis in the long run.
“In 2020, we expect BPO demand to be strong, despite the limited amount of PEZA (Philippine Economic Zone Authority)-accredited office space. BPO demand is strongest in BGC (Bonifacio Global City) and Pasay, where rents should be going up. Conversely, Ortigas and Quezon City may have more supply than demand, and rents will stay flat in those areas as the vacancy rates increase,” said Morgan McGilvray, Santos Knight Frank senior director of occupier services and commercial agency.
The BPO industry will continue to be a major driver of demand for office space, growing by 3 to 7 percent annually, according to a joint research by IBPAP and Everest. The fastest growth in terms of employment between 2019 and 2022 are seen in the healthcare, animation and game development sectors.
Co-working expands in Manila and beyond
The recent years saw an explosion of co-working brands in the Philippines. International players such as WeWork, Spaces and Common Ground have established their base alongside local players such as Acceler8 by UnionSpace, Clock In by Ayala Land and Work.able by RobinsonsLand Corp. In addition, a number of co-working space brands are now single-office tenants.
Co-working spaces are also increasing in Metro Cebu. Santos Knight Frank estimates about 3 percent of the office market are co-working spaces, spread across Cebu IT Park, Cebu Business Park and selected buildings in the fringes.
All these are driven by the demand from freelance workers, startup companies and entrepreneurs, and BPO firms urgently needing a plug-and-play setup.
A new focus on sustainability
As the real industry becomes increasingly aware of its environmental impact, more property owners are turning to green design, solutions and systems, such as Leadership in Energy and Environmental Design (LEED) in constructing and operating their buildings.
To date, there are more than 300 buildings in the Philippines implementing LEED guidelines, half of which are already LEED-certified. Supply has grown as more tenants add LEED certification to their requirements in selecting office spaces.
LEED-certified buildings not only carry environmental benefits, but they also position properties to the premium side. Santos Knight Frank reveals that LEED-certified office buildings in BGC, on average, commanded 12.5-percent higher lease rates than non-LEED-certified buildings.
Industrial and logistics look outside Manila for growth
The Philippines’ robust e-commerce market, with its increasing need for warehouses and distribution centers, continues to fuel the industrial and logistics real estate sector.
Santos Knight Frank believes that the next wave of growth in the industrial and logistics real estate sector is outside Metro Manila. “The areas of Calabarzon (Region 4A) and the corridor NLEx-SCTEx-TPLEx in North Luzon are prime spots for logistics and industrial real estate to grow. These would be the next hubs for distribution centers and warehouses,” Salvador pointed out.
Manila still hot for prime residential
Manila’s prime residential market registered one of the highest growth rates globally in 2019, increasing by 6.5 percent in Knight Frank’s Prime International Residential Index. Manila is eighth-highest globally and third-highest in Asia.
The growth in the prime residential market in Manila is driven by a tight supply of luxury and high-end properties, increasing number of Filipino ultra-high net worth individuals and demand from foreign buyers.
Eight residential projects were launched in the fourth quarter of 2019, including the latest prime properties such as Gardencourt Residences by Ayala Land, Parkford Suites Legazpi by Alveo Land, and The Seasons Residences Natsu Tower, a joint venture of Federal Land and Japanese-based Nomura Real Estate Development and Isetan Mitsukoshi.
This year, Santos Knight Frank reports three projects that are slated in the first quarter of 2020: The Velaris Residences, a high-end development by Robinsons Land and Hongkong Land; Sonora Garden Residences by Robinsons Land and DMCI Homes; and Avida Towers Parklinks.
Co-living spaces and the rise of the micro-studio
With traffic congestion in Metro Manila, co-living spaces have become the most viable solution for employees and young professionals working within or near central business districts (CBDs), without having to pay premium apartment leases or buy condominium units.
A number of developers have been capitalizing on the growth of co-living. Among the primary players in this space are SM’s MyTown and Ayala’s The Flats, which are set up either within CBDs or around its fringes. New units are up and coming for Filinvest in Dormiko, Zenya Lofts and The Crib.
Various forms of affordable accommodations have also been introduced, such as the micro-studio. Unlike the multiple-occupant model of co-living players, a micro-studio rental apartment is built for a tenant who requires privacy. A micro-studio can average about 11 square meters. AboitizLand and Point Blue recently sealed a partnership that drives this category.