By Denise A. Valdez
THE Philippine real estate industry is seen to keep growing this year, driven by the kickoff of real estate investment trusts (REITs), expanding business process outsourcing (BPO) industry and strong consumer demand.
In a statement over the weekend, real estate consultancy firm Santos Knight Frank said several factors may offset the decline in real estate growth brought by the coronavirus disease 2019 (COVID-19) outbreak.
It said 2020 is set to be the “year for REITs,” following the regulator’s relaxation of rules to attract REIT offers from property developers. This includes the reduction of the minimum public float to 33% and the value-added tax exemption when transferring properties to a REIT vehicle.
So far, Ayala Land, Inc. has applied to do an offer of up to 478.64 million shares in office properties in Makati City, which will raise up to P1.36 billion for the company.
“More property companies have expressed interest in REITs after regulators unveiled the revised rules in January. Property giant Ayala Land recently filed its application… while DoubleDragon Properties Corp. is looking at raising P11 billion annually over a six-year period via REITs,” Santos Knight Frank said.
Looking at more mature REIT markets in Asia Pacific such as Australia, Hong Kong, Japan and Singapore, the consultancy firm said these countries have recorded higher dividend yields from REITs compared to listed property companies, which paints a rosy picture for the potential of Philippine REITs as well.
“Santos Knight Frank believes that REITs will unlock a number of opportunities in the property market, such as greater access to real estate investment and revitalization of capital markets,” it said.
Shares in listed property firms have seen a volatile movement in the local bourse, in line with the volatility of global equities due to COVID-19.
But with the launch of REITs, Santos Knight Frank said this opens an opportunity for more participants in the property market.
“REITs have the power to sustain long-term growth for the Philippine economy through investments,” Santos Knight Frank Chairman and Chief Executive Officer Rick M. Santos said in the statement.
“We anticipate that REITs will drive an increase in acquisition, consolidation, and property development activities across the Philippines in the coming years. New capital raised by the developers through REITs will enable expansion of the real estate sector not only in Metro Manila but also in the provinces…,” Santos Knight Frank Associate Director for Investment & Capital Markets Kash Salvador added.
Aside from REITs, the real estate sector is also seeing tailwinds from the continuous growth of the BPO sector. With the government’s moratorium on new economic zones in Metro Manila, Santos Knight Frank said BPOs may start moving to the countryside, driven by the sustained high demand from locators.
“From 1.23 million direct hires as of 2018, the entire Philippine BPO industry is expected to support up to 1.57 million by 2022. Santos Knight Frank estimates that the growth of 7% CAGR would, in total, require an estimated office space of 1.2 million square meters for the 260,000 new jobs generated,” it said.
The co-working trend is another element that may keep the real estate sector growing, as the consultancy firm said high demand from freelancers, start-ups, entrepreneurs and BPOs continue attracting new co-working space brands into the country.
The rise of sustainable buildings is also a growth driver for the sector, as Santos Knight Frank said there is a 12.5% higher lease rate in buildings that are Leadership in Energy and Environmental Design (LEED)-certified compared to those that aren’t.
“As the real industry becomes increasingly aware of its environmental impact, more property owners are turning to green design, solutions, and systems… LEED-certified buildings not only carry environmental benefits, but they also position properties to the premium side,” it said.
Industrial and logistics sectors are likewise seen to further expand this year, fueled by the demand from the e-commerce market. “The areas of Calabarzon and the corridor (of expressways) 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,” Mr. Salvador said.
In terms of residential spaces, Manila is likely to sustain its dominance, as the consultancy firm said there are three projects scheduled to launch in the first quarter of 2020 alone: The Velaris Residences, Sonora Garden Residences and Avida Towers Parklinks.
“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,” Santos Knight Frank said.
Co-living spaces are likewise going to push the growth of real estate, as big property developers continue investing in this segment.
“The beginning of 2020 has been marked by a series of unexpected events that continue to affect the global economy. Despite the impact of COVID-19 and downturn in international stock markets, the Philippine real estate industry continues to have reasons to be optimistic,” it said.