A good year ahead?
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - January 1, 2018 - 12:00am

SAN FRANCISCO – A Happy New Year to everyone! That was some year we just blew away with some colorful fireworks last night. It was a year that produced a lot of hope for a better future even as we were still mired in our festering problems.

The last year saw the eruption of open conflict with secessionists that practically destroyed the colorful city of Marawi. It was a year marred by a number of man-made and natural disasters. It was also a year when the world focused its attention on us as we hosted the ASEAN 50th anniversary summit meeting attended by some of the world’s most important leaders.

On the economic front, our long delayed credit upgrade was finally given by Fitch at a time when we were giving mixed signals to investors. On the one hand, our economy was showing strength and the promise of Build Build Build telling everyone that the best is yet to come.

On the other hand, political risk gave analysts and investors reasons to hold back. Talks of an extra-constitutional revolutionary government intensified a feeling of unease. Impeachment cases against the Chief Justice and the Ombudsman telegraphed the intolerance of the ruling coalition.

The popularity of President Duterte sagged mid-year, only to bounce back at the next reading of public sentiment by the Social Weather Stations. Perhaps there is a feeling that the president is starting to grow into the job of being President and acting less and less the city mayor that he had been.

Given everything on the table, there appears to be guarded optimism in the business community that we are finally getting ourselves in the right direction. If only the politicians can take a long vacation or keep their misguided opinions to themselves, 2018 may turn out to be the banner year that will cement the legacy of President Duterte.

I just received the most recent assessment of the property sector from Colliers and it mirrors this sense of guarded optimism. The property sector has always been a good barometer of the public’s sense of economic well being. After all, investing in property, whether for commercial reasons or for a family residence, forces people to evaluate their prospects as well as that of the economy.

The Philippines’ property sector recorded mixed results for the first nine months of the year. We see challenges ahead, Colliers observed, but with abundant opportunities for the sector over the next 12 months.

Colliers is echoing the sentiment of foreign analysts I have talked to about the importance of Build Build Build being executed well. Hitches in the awarding of projects or inability of DOTr and DPWH officials to make timely decisions can quickly sour whatever hopeful and positive sentiments we have now.

“Moving forward, much of the country’s growth will hinge on ramped-up infrastructure spending. The ushering in the ‘golden age of infrastructure’ also lends support to the government’s decentralization push which should unlock land values in areas outside of Metro Manila and stimulate business activities in the countryside,” Colliers observed.

More important, Colliers sees more opportunities outside Metro Manila. “We recommend that developers zero in on the thriving opportunities outside of the country’s capital. Ultimately, we see the government’s infrastructure policy dictating the strategies of both local and national developers.”

Colliers didn’t sound bullish about building new office spaces in Metro Manila. The office sector, it observed, is only being kept afloat by the influx of offshore gambling entities. There has been a slower take-up from outsourcing firms. But Colliers says “we do not see offshore gambling as a major demand driver beyond 2018.”

Residential leasing in Metro Manila remains challenging, Colliers observed. No wonder we are getting more condo leaflets being shoved to us at malls.

“We see vacancy rising to about 14 percent to 16 percent over the next 12 months given the more than 21,000 additional units projected to be completed during the period. Completions in the fringe locations have also been rising, exerting upward pressure on overall vacancy.”

Instead, Colliers sees opportunities in workers’ dormitories in key business hubs in major business districts. The unbearable Metro Manila traffic situation has opened up this new market for workers in our CBDs.

Getting out of Metro Manila appears to be the overriding theme of the Colliers forecast. It noted that both national and local developers have been active in addressing the rising demand for residential projects in major urban areas in Luzon (except Metro Manila), Visayas, and Mindanao.

“The improvement of road networks and expansion of airports should further unlock land values in these areas, making them more feasible for residential projects. The demand for residential units in these locations will continuously grow as we believe that a significant part of the remittances sent in by OFWs annually will continuously be set aside for Filipinos’ housing requirements.”

The good news from Colliers is about the “surge of manufacturing investments propelling the demand for industrial space and standard factory buildings. However, we project that lease rates in the country’s industrial corridor, Cavite-Laguna-Batangas area, will record flattish growth over the near term due to the proliferation of alternative industrial parks in Northern and Central Luzon.”

Flexible workspace, a novel concept, was mentioned by Colliers as promising.

“The profile of tenants using these spaces varies from start-ups, to law firms, Fortune 500 companies and freelancers. Today, there are about 1.3 million freelancers in the Philippines. As mobility, connectivity and flexibility become the norm in working in the 21st century, occupier demands will also change sharply, requiring more flexible office spaces over the near to medium term.”

The property sector appears to be reacting fast to new trends and taking advantage of opportunities in the local market. If the rest of the economy’s other sectors are as nimble, the next 12 months may prove to be the year we finally pick up speed for take-off.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco           

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