Real estate industry thrives with projects outside Metro Manila

Real estate industry thrives with projects outside Metro Manila

CB Richard Ellis (CBRE) Philippines officials pose after the briefing on the state of the Philippine real estate industry in Shangri-La Hotel last June 2. From left: Director of Corporate Agency and Brokerage Department Morgan McGilvray; Chairman and Founder Rick Santos; Research Manager Alria Ventanilla; Associate Director for Investment Properties and Capital Markets Department Kash Salvador; and Senior Director of Global Research and Consultancy Jan Custodio.

by Vanne Elaine Terrazola, Manila Bulletin

June 6, 2016 (updated)

Global property consultant CB Richard Ellis (CBRE) Philippines said decentralization may come easy for the incoming administration as the business processing outsource (BPO) industry has started the move, already driving developments for the country’s real estate sector.

Metro Manila has long been known as the country’s center of development, said CBRE Philippines Founder and Chairman Rick Santos.

During a briefing in Makati last Thursday, Santos boasted that the real estate industry has grown at a faster rate as investments in areas outside Metro Manila are significantly rising year by year. Areas such as in Laguna, Cavite in the south; Bulacan and Pampanga in the north; Cebu, Bacolod, and Iloilo in the Visayas; and Davao, Cagayan de Oro, and Zamboanga in Mindanao are gaining investments for their economic potential, Santos said.

“Developments in these secondary sites were initially limited to the local developers. Over the past several years, the national developers started to enter these sites on a growing scale,” he said.

‘Thanks to the BPO sector’

While CBRE Philippines lauded President-elect Rodrigo Duterte’s promise of inclusive growth by a decentralized system of governance, the BPO sector, they said, is already leading the way in its process.

The demand for office spaces increases outside major central business districts (CBDs) in the metro, mostly from multinational companies from the BPO industry, Santos said.

The Philippines, according to the CBRE, had become one of the most preferred destination for BPOs of American and European companies, lining up with top outsourcing countries India, Malaysia, China, Mexico and Poland.

Santos said BPO revenues have been growing at a rate of 17 percent annually and accounted for 7.5 percent of the country’s Gross Domestic Product in 2015.

“The country’s educated young labor force, low cost of labor, notable customer service, low rental rate and high yield rate stand to provide a thriving environment for foreign investors,” Santos said.

Demand for office spaces

Premium office spaces in major CBDs such as Ayala, Makati and Bonifacio Global City in Taguig have already marked record sales. And while they may experience tight supply today, especially in Makati, Santos said their office markets are expected to grow more within the next two to three years despite increasing costs.

Businesses are also renting out in alternative office districts such as Alabang, Quezon City and pocket developments such as those in Ortigas and C5 area in Pasig, and the bay area in Manila as rents in the key office districts continue to go up.

BPO companies, Santos stated, are also becoming more aware of the advantages of expanding outside the capital region.

While more than 70 percent of BPO jobs are located in Metro Manila, Santos said that seven of 100 outsourcing destinations of known consultancy firm Tholons are outside, indicating the readiness of other regions for BPO development.

“Companies are locating outside Metro Manila where there is more untapped labor and where they have less competition and limited poaching. These destinations have significantly lower rents brought by the lower cost of land and labor, thus making them cost-effective expansion sites,” said the CBRE Philippines chair.

And as the BPO industry evolves, Santos said the overall office market is expected to remain healthy.

Continuity is key

Santos said while the decentralization path pursued by the incoming administration will provide growth outside Metro Manila, it is vital for President-elect Duterte to ensure the continuity in the current macroeconomic policies.

He cited as important, among these policies, is the completion of pending public-private partnership (PPP) projects and its promise of boosting infrastructure.

“As Metro Manila continues to be saturated, the need for new areas to be developed has become imperative in order to accommodate the growing demand in the market. Opportunities can be found in locations such as Laguna, Cavite, Bulacan and Pampanga, which are all accessible via land transport. Crucial to the further development of these locations is to shorten the travel time between Metro Manila and these areas,” said Santos.

Meanwhile, he expects that investors’ confidence in the country will improve as crime rates were seen to drop, given the President-elect’s reputation on law and order and his plans to implement discipline throughout the country.

He also hoped that the new administration will fully implement the Philippine Export Development Plan “which would bolster demand for industrial real estate in the country.”