Revised REIT guidelines to benefit office segment

CEBU, Philippines —  The Philippine’s office segment in the property sector is seen to get a boost despite the effects of pandemic, following approval of the revised guidelines on Real Estate Investment Trust (REIT) in the Philippines.

According to JLL Philippines, a real estate services and consultancy firm, the office segment the most attractive asset class going forward.

“Philippine Real Estate Investment Trust: A Bright Spot in the Next Normal”, JLL says the commencement of the REIT market in the country was well-timed and a much-needed development,” JLL states in its latest property market study in the Philippines.

“We believe REITs are one of the country’s future bright spots and will play an important role in jumpstarting the economy from the adverse effects of the pandemic and will promote growth in the real estate sector,” it added.

“This will provide a cheap funding source for developers, raising fresh capital for finance future projects, which in turn will ramp up construction activities and employment,” said Janlo de los Reyes, JLL Philippines’ head of research and consultancy.

Among the asset classes, the office segment is the most attractive due to its relatively stable outlook and resilient rental growth rates moving forward, he explained.

The office segment’s substantial growth over the years due to the demand from outsourcing firms and the online gaming sector, as well as the possible future office space demand from foreign investments, will make it an attractive asset class for REITs.

“As the government targets to reopen the economy and increase the operational capacity of businesses, we expect demand to improve in 2021 and potentially normalise in 2022,” added Luis Zarcal, Assistant Manager for Research and Consultancy.

“We remain confident that traditional offices and O&O firms will spearhead demand post-lockdown. We may also see increased demand for office spaces outside Metro Manila, such as Cebu and Davao, for potential business continuity plan site locations,” Zarcal continued.

Furthermore, foreign investments diversifying manufacturing operations outside China could drive demand for office space, as these companies would need to set up headquarters for backend support, noted Zarcal.

The under-penetrated industrial/logistics space is another attractive segment for REITs.

The regional lockdown caused by the pandemic forced the country to tap the online/e-commerce platform to access basic goods and services, which pushed businesses to fast track digitalization efforts. This could scale up the demand for quality warehousing spaces to cater to the growing market of e-commerce, JLL said.