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In the property sector, it is always important to keep an eye on the Philippine real estate market trends, so we can identify new opportunities and possible challenges ahead.

Here’s a look into Colliers International’s Top 10 Forecast for 2019. In it, you’ll find some insights on the strong demand and supply when it comes to the real estate business for the next 12 months.

In a report entitled, “Top 10 Forecast for 2019: Flexibility is the name of the game”, by Colliers International Philippines, it is predicted that the strong demand and preference of tenants is giving rise to flexible workspaces.

Colliers International explained: “Developers are cashing in on the thriving property market by aggressively acquiring parcels of land outside of the more established business districts. Residential developers are modifying their projects to cater to Chinese offshore gaming employees and local professionals; and mall operators are more open to foreign food and beverage and home furnishing tenants, which we see redefining retail space absorption in 2019”.

Colliers International stressed that “Amid the slower economic growth in the first nine months of 2018, the property sector has remained resilient with major segments such as office and residential poised for record-high demand and supply in 2018.”

The primary challenges, according to Colliers Philippines, include the rising interest rates which could reduce low to mid-income residential demand over the next 12 to 24 months, and rising inflation, which may further diminish consumer spending.

It also mentioned the uncertainty surrounding the implementation of the second package of the Comprehensive Tax Reform Program—a measure proposing to reduce corporate income tax rates and rationalize tax and non-tax perks granted to foreign investors.

In addition, the delays in construction due to an acute shortage of skilled workers, as well as right-of-way issues stopping the construction of important infrastructure
projects across Metro Manila, prove to be a challenge, as well.

Here are Colliers International’s top 10 highlights that will define the Philippine property sector in 2019.

1. Infrastructure-led government spending to spur property

“Colliers believes that property firms will be more aggressive in acquiring parcels of land in Northern and Southern Luzon and ensure that they are strategically positioned, especially in Pampanga, Bulacan, Cavite, Laguna, and Batangas. Developers’ expansions should be supported by the completion of rail, expressway and toll road projects between 2020 and 2022 that is planned to pass through these provinces,” Colliers said.

It expects the government’s plan of frontloading infrastructure projects driving the country’s property sector in and outside Metro Manila. It predicts a more pronounced dispersal of office and residential developments outside metro in 2019.

2. Metro Manila office vacancy to remain at sub-6 percent

“We see strong demand being carried over to 2019, with projected demand to move in step with the new supply. Over the next 12 months, Colliers sees the delivery of nearly 1 million sqm of new office space and take up of about 910,000 sqm. This should yield a vacancy of 5.4 percent by end-2019. About 30 percent of office space due to be delivered in 2019 is already about 30 percent pre-leased,” Colliers said.

Colliers said it is expecting Manila office vacancy to extend at around 5 percent by end-2018.

Colliers sees the knowledge process outsourcing (KPO) sector — which provide higher value outsourcing services such as health information management, software engineering, and finance and accounting — driving office
demand in the next 12 months. Such demand is increased by the presence of top technology firms in the country such as Google.

3. Offshore gaming to expand outside Manila

For 2019, Colliers predicts that offshore gaming firms will occupy 200,000 sqm to 300,000 sqm of office space, representing as much as 23 percent of the projected take-up in 2019.

“Aside from expansive office space and residential availability, offshore gaming companies need to operate in cities that have airports offering direct flights to China or areas that have direct access to and from Manila. This is one of the reasons why these firms are starting to look at a number of cities in Southern Luzon,” Colliers said.

4. Flexible workspaces to grow by 10 percent annuallyv

The tight Metro Manila office market, coupled with the emergence of a mobile workforce and firms’ drive to bring down operating costs, has given rise to another office sub-segment, which is the flexible workspace.

“We see Manila’s flexible workspace stock expanding by at least 10 percent per annum over the next three years on the back of continued rise of micro, small and medium enterprises ; influx of multinational corporations and outsourcing firms looking for plug-and-play offices; and the implementation of a set of policy reforms likely to improve the country’s business climate,” Colliers predicted.

Colliers also added that “Over the next three years, we expect more flexible workspaces to be offered in malls, hotels, residential towers and dormitories for professionals.”

5. Manila Bay area to dominate Metro Manila condo price, supply

“In 3Q 2018, the Bay Area overtook Ortigas Center as the third largest submarket in terms of condominium stock, with 200 more residential units available compared to Ortigas Center’, said Colliers.

Colliers forecasted, that in 2019 more than 6,000 new condominium units in the Bay Area out of the projected 15,000 new units will be completed. By 2021, Colliers also expects Bay Area to overtake other submarkets such as Makati central business district.

6. Luxury residential market to remain strong, price to breach P400,000 per sqm

Colliers sees the luxury condominium demand to remain strong because Metro Manila has one of the most attractive rental yields in the region, with relatively low prices and sustained demand from affluent Filipinos, foreign investors and offshore gaming firms.

“The luxury market in the country’s capital is relatively small but demand has been stable over the past few years. The projects being leased out or sold to the secondary market continues to receive strong demand.”,Colliers explained.

The restrained demand also encourages mid-income condominium developers to scale up and construct high-end projects in emerging business districts such as the Manila Bay Area. A project between SM Prime and Federal Land that will be built along Ayala Avenue in Makati is expected by Colliers International to breach the P400,000-per-sqm price point.

7. F&B to further dominate retail absorption

The food and beverage (F&B) segment will remain the major driver of retail space absorption in Metro Manila, and Colliers sees this being sustained in over the next 12 months. The continued inflow of remittances from overseas Filipino workers and rising disposable incomes, coupled with a stable macro-economic backdrop, and a number of foreign F&B brands opening their branches in Manila helps in contributing to the greater retail space absorption across the country’s capital.

8. More foreign players in home furnishing, luxury retail in the Bay

Colliers said it forecasts sustained demand for home furnishings given the increasing popularity of condominium living in Metro Manila. Nearly 60 percent of projects launched in the third quarter of 2018 are studio and one-bedroom units.

Colliers pointed out that prices of pre-sale condominiums in the reclaimed business district have been rising by about 30 to 80 percent since being launched early last year. This, according to Colliers, indicates the spending profile of tourists and foreign investors in the area.

9. More strategic land banking, township development in QC

The groundbreaking for the Manila subway, the most expensive project approved by the government, is planned in December 2018, with the first three stations in Quezon City—Mindanao Avenue, Tandang Sora, and North Avenue— and is forecasted to be completed in 2022.

“Colliers sees Quezon City benefiting from the planned subway as seven of the 13 stations are planned within the city. With improving connectivity given the construction of the Manila Subway, MRT-7 and the common LRT-MRT station, we see Quezon City becoming more attractive for mixed-use projects that feature office, residential and retail projects,” Colliers said.

10. Upgraded infrastructure to spur Cebu leisure

Aside from the modernized and expanded airport, Colliers sees Cebu’s tourism sector growing due to a number of infrastructure projects which should widen the new opportunities in the countryside. The completion of these projects should prompt demand for more hotels and serviced apartments outside the Metro Cebu.

In the next 12 months, Colliers forecasts property firms to take a more aggressive approach in exploring parcels of developable land especially in the Mandaue and Mactan areas.

According to Colliers International, we can look forward to new factors coming into play, driving demand and pushing growth across the Philippine real estate sector this year. These apparent Philippine real estate market trends are predicted to push industry players in the property sector to adapt to these changes, which would better suit the market.

Sources:
Colliers Outlook – Top 10 Forecast for 2019: Flexibility is the Name of the Game
Colliers International – Top 10 Forecast for 2019

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