One of the industries that is gaining a lot from favorable macroeconomic conditions is the real estate industry. According to the Philippine Statistics Authority (PSA), the gross value added (GVA) of real estate in the first two quarters of 2017 hit P238.7 billion, compared to P209.7 billion in the same period last year. Likewise, the GVAs of renting and other business activities and ownership of dwellings rose to P501.2 billion and P252.9 billion, respectively. All told, real estate, renting and other business activities or RERBA had a combined GVA of P992.8 billion in the first half of the year, up from P908.1 billion in the comparable period a year earlier.
“Years of investment and strong economic development in the Philippines have fostered a robust real estate sector that now extends outside of the greater Metro Manila region and into secondary markets around the country,” said Oxford Business Group (OBG). “Economic development and a growing middle class continue to fuel demand for new, high-grade residential units, while commercial investment drives an ever-increasing amount of retail and office space.”
Cebu is one great example of a bustling property market outside the National Capital Region. According to Colliers International Philippines, a real estate services firm, the Queen City of the South remains the largest retail hub after Metro Manila, due to factors like the proliferation of outsourcing companies, influx of local and foreign tourists and the sustained generation of employment opportunities by traditional companies. Colliers said in its second-quarter report on Cebu’s retail market that in spite of the increase in stock of available retail space since 2008, vacancy has remained low because the expanding local economy, which boosts disposable incomes, has offset supply. Colliers expects the completion of new supply in the coming months from both local and national developers. “Given the competitive retail landscape in Cebu, we encourage developers to exhibit a more interesting mix of F&B (food and beverage) and fast fashion brands to sustain visitor traffic,” the firm said.
The office market of Cebu is also robust. According to KMC Savills, Inc., a Bonifacio Global City-based real estate services provider, rental performance of the province improved to 1.4% year-on-year in the second quarter of 2017. “Cebu IT Park led the resurgence in overall rents after outperforming other submarkets with an impressive 4.3% YoY increase,” the firm said in its second-quarter report on Cebu’s office market. KMC said the outsourcing sector will still drive demand for office space.
Things are pretty much in good shape in the residential market of Cebu, but Colliers observed mixed demand for vertical (condominiums) and horizontal properties (houses and lots). “Demand is stronger in vertical developments than house and lots as prices are now comparable between the two types,” the firm said. The growing business center in the capital, Cebu City, is expected to support demand for affordable and mid-income segments. “The majority of new supply will come from Cebu City given its proximity to the business district. Mandaue and Lapu-Lapu will remain as alternative locations,” the firm said.
In Iloilo, which has grown to become another significant area in the country’s real estate industry, the residential market is still dominated by horizontal properties. “Although some vertical (condominium) projects were recently completed in the Iloilo Business Park, the condominium market is still in its early stages,” Colliers said. The firm noted that taking a look at the property launches and the take-up of houses and lots in the province would reveal that demand is a function of the available supply, adding that in the latter part of 2016, the projects launched were significantly sold. “Banking on a pool of buyers from new Ilonggo families and Overseas Filipino Workers (OFW) composed of nurses and seafarers, demand for houses will likely grow, especially as the business district also develops,” the firm said.
At least a quarter of the retail space in Iloilo is occupied by food and beverage companies, like restaurants and food retail outlets. Colliers said this phenomenon is attributable to Ilonggos’ fondness for food. Colliers believes that the projects major developers in the region have lined up indicate that the purchasing power of the city is improving. And this improvement can be chalked up to the thriving business process outsourcing sector, healthy tourist arrivals and sustained flow of remittances from overseas Filipino workers. Given the city’s residents’ higher purchasing power, Colliers recommends that local and national retailers be more aggressive in introducing new food and beverage concepts to Iloilo consumers, and explore the fast fashion segment, which appeals to a millennial workforce. A particular suggestion of the firm to developers planning to build townships is to construct smaller retail formats like neighborhood malls.
To the south, Davao has a lot of potential. “Another area that should not be discounted is the president’s hometown of Davao, which could very likely receive increased investment in the up-coming national budgets,” OBG said. In a paper, Isla Lipana & Co. noted that with more investments and infrastructure prospects in the Davao region, the real estate sector is expected to keep trending upward for the next half decade. It helps, the firm highlighted, that out of 25 Philippine cities, Davao City ranked first in dealing with construction permits, which bodes well for any developer hoping to build something there. “Expected investments in Davao City include a P1 billion project for the construction of a steel plant and a P1.5 billion investment for the development of a residential component and renovation of the Apo View Hotel,” the professional services firm added.
Apart from the aforementioned areas, which are located in Visayas and Mindanao, OBG said that Ilocos Norte and Pangasinan are two more up-and-coming areas that are being driven by commercial and tourism growth. “Buoyed by a strong macroeconomic environment, cash-laden investors and a full pipeline of projects scheduled to be built over the next decade, the real estate sector will continue to exhibit strong growth in the coming years. A steady stream of new residential and mixed-use projects is under way at locations across the Metro Manila area, as well as other fast-growing secondary cities around the country,” OBG said.