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Challenges and opportunities

What’s in store for the property sector in 2018?

Global real estate services provider Colliers International, in its latest report, revealed its top 10 predictions for the next 12 months.

First, it believes that much of the country’s growth will hinge on ramped-up infrastructure spending which will support the government’s decentralization push, unlock land values in areas outside of Metro Manila, and stimulate business activities in the countryside where developers should be building.

Second, the group expects Metro Manila residential condominium leasing to remain challenging, given the influx of new condominium completions in both major business districts and fringe locations. From an 11.7 percent overall vacancy rate in the second quarter of 2017, Colliers projects vacancy rising to 14 to 16 percent over the next 12 months given the more than 21,000 additional units projected to be completed during the period.

Colliers also expects developers to continue venturing into residential projects in second-tier and third-tier cities all over the country, where demand primarily comes from end-user buyers. The markets may be smaller compared to Manila, but more stable in terms of end user housing demand, it said.

Third, with Pagcor issuing 51 Philippine Offshore Gaming Operators (POGO) licenses so far, these POGOs will fill the void left by the BPO sector in terms of office tenancy. Colliers anticipates less office launches in 2018 following the decline in BPO companies’ office space demand brought about by the US taking a more protectionist stance, increasing talent recruitment difficulties and cost, threats to jobs from automation, and delay in Philippine Economic Zone Authority (PEZA) approvals.

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Fourth, Colliers projects greater demand for flexible workspace in 2018, especially with major international co-working operators entering the local market. Tenants vary, from start-ups, to law firms, Fortune 500 companies and freelancers, and their numbers keep growing as mobility, connectivity and flexibility become the norm, Colliers observed.

Fifth, the growing popularity of ecommerce will drive warehousing and logistics demand. While only one percent of the country’s population shop online, this presents a massive opportunity that developers and retailers could tap, and consequently the need for logistics services and warehousing.

Sixth, industrial park developers are expected to head north of Luzon. The report anticipates industrial lease rates in Cavite, Laguna and Batangas recording flattish growth due to the development of more industrial space in the Northern/Central Luzon area.

Seventh, Colliers expects developers to build more townships outside Metro Manila such as Cavite, Laguna, Bulacan, Pampanga, Cebu and Davao over the near to medium term as land values are being unlocked by an aggressive expansion of road networks.

Eight, three and four-star hotels in resort destinations will be more visible over the next two to three years, with the most attractive locations being Cebu, Bacolod, Iloilo, Palawan, Davao and Bohol. Developers should consider building budget hotels to cater to a continuously growing domestic market that is primarily driven by millennial travellers, it said.

Ninth, unlike in the US where brick-and-mortar retail malls have closed shop due to the fierce competition brought about by online retail businesses, malls will remain here, but Colliers suggested that they use online shopping and social media platforms to complement their physical stores.

The report also encouraged operators and retailers to ramp up the security features of their online sites to encourage shoppers to use their credit cards, debit cards and mobile wallets more frequently for online transactions.

Lastly, Colliers projects that Cebu’s rising attractiveness as a tourist spot and growing competitiveness as an investment destination should support a 15 to 20 percent growth in tourist arrivals over the next 12 months. This should sustain hotel occupancy of between 65 and 70 percent across Metro Cebu over the next 12 months, it said.

Meanwhile,  the report, noted that while challenges lie ahead, opportunities abound for the property sector over the next 12 months.

Research manager Joey Roi Bondoc emphasized that developers should take advantage of opportunities that could arise from the implementation of government policies such as the comprehensive tax reform package, relaxation of foreign ownership restrictions on retail and construction, and amendments to the existing procurement law and business registration systems which should entice more developers to take part in the government’s ambitious infrastructure development program.

Colliers, likewise, encouraged the property developers’ infrastructure units to explore operation and maintenance (O&M) opportunities involving transportation projects in and outside of Manila, and for developers, be more innovative given the proliferation of townships and expansion of opportunities in alternative markets such as Cebu.

The company noted that the office sector remains afloat despite slower take-up from outsourcing firms, as offshore gambling firms fill the void, although Colliers does not see offshore gambling as a major demand driver beyond 2018.

It also said that residential leasing in Metro Manila remains challenging, but it sees opportunities in workers’ dormitories in key business hubs in major business districts and affordable house and lot developments in urban areas outside of the country’s capital.

To summarize, the property market drivers for 2018 will be flexible workspace and non-BPO firms for the officer sector, dormitories for the residential sector, experiential retail for the retail group, resort-oriented establishments for the hotel sector, and warehousing and logistics for the industrial sector, Colliers said.

For comments, e-mail at mareyes@philstarmedia.com

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