Long-term growth foreseen in Manila’s property market, says Santos Knight Frank

06 December 2017

Long-term growth prospects for Manila’s real estate market remain high as the office, retail, residential and industrial sectors continue to expand, according to leading real estate service provider Santos Knight Frank.

Manila’s office rental growth reached 4.3% year-on-year as vacancy rates remain at a very healthy level with 220,000 square meters of additional office stock in the third quarter.

Meanwhile, prices across residential segments have risen, with the luxury residential growing the highest at 28% year-on-year. More than 52,000 residential units are slated for turnover before the end of 2018.

Despite the global rise of e-commerce, the Philippine retail sector remains an attractive investment opportunity and is set to add 630,000 sqm in the next three years. That expansion is crucial for the industrial real estate sector, where the need for warehousing and storage space continues to drive demand.

Rick Santos, Chairman & CEO of Santos Knight Frank, Inc. comments: “We’ve seen a vibrant real estate market in 2017 driven by strong investment inflows into the country which trigger a positive ripple effect across all property sectors. We expect an even better market in 2018 as infrastructure projects go into full swing and create a more conducive business environment.

 


CAPTION: The office market in Manila continues to expand with more upcoming space in the pipeline. Among these is The Brilliance Center, a 16-storey, prestigious office tower in Bonifacio Global City. Set to open in 2019, The Brilliance Center will feature about 4,800 sqm of office space and 600 sqm of leasable retail area.

OFFICE

Performance:

  • In the third quarter, more than 220,000 square meters of additional gross leasable area (GLA) has been added to the total office stock. Most of the new supply was already pre-committed and taken up immediately. The total Prime and Grade A office supply has reached more than 4.5 million square meters.
  • Metro Manila weighted average lease rate grew 1.6% quarter-on-quarter and 4.3% year-on-year. The continuous escalation in rates demonstrates a robust and resilient office sector.
  • Vacancy in Metro Manila increased to almost 5% in the third quarter of the year due to the large volume of additional stock introduced during the quarter.

Forecast:

  • Office take-up or net absorption for the whole of 2017 is expected to reach above 600,000 sqm.
  • Over 3.7 million square meters of office GLA is estimated in the next 5 years. A total of 946,782 square meters of leasable office space is expected to be added to the current supply by 2018. Around 409,377 square meters or about 76% of the total upcoming supply will be in BGC.
  • PEZA approvals are anticipated to pick-up following a more positive outlook in the IT-BPM industry in the coming periods.
  • More companies in the Philippines are anticipated to adopt the Activity-Based Working setup.

 

RESIDENTIAL

Performance:

  • Immense investor activity, demand for residences near offices and the growing popularity of tourism and staycation propelled the performance of the residential market.
  • The Metro Manila residential condominium sales market remains dominated by mid-end projects, which comprise about 64% of the total stock. This is followed by high-end, affordable and luxury projects with 24%, 10% and 2%, respectively.
  • Overall percentage sold in Metro Manila is 85% from 79% a year ago.
  • Prices have increased across segments year-on-year and are now at P57,000 to P89,000 per square meter for affordable (7% change); P78,000 to P176,000 per sqm for mid-end (6% change); P108,000 to P187,000 per sqm for high-end (4% change); and PHP182,000 to 350,000 per sqm for luxury (28% change).

Forecast:

  • More than 52,000 residential units are slated for turnover before the end of 2018.
  • Emerging business districts to watch out for include the Bay Area in Pasay and Parañaque Cities, and Arca South in Taguig City. Fringe areas would remain a viable option for developers due to the limited supply of developable land in CBDs.
  • Driven by sustained healthy demand, prices are likely to continue increasing next year.

 

RETAIL

Performance:

  • The Metro Manila retail scene remains vigorous with the rising number of retail spaces and continuous entry of local and foreign retailers.
  • Third quarter retail space take-up was driven mostly by retailers of food and beverages and clothing apparel, comprising 46% and 25% of total retail openings, respectively. The remaining portion were under homeware, consumer electronics, department store and supermarket.
  • Ayala Malls leads the pack with most of the remaining turnovers for the year 2017, including Ayala Malls Marikina Heights, Feliz Town Center and Southvale Retail.

Forecast:

  • An estimated gross floor area (GFA) of more than 182,300 square meters of shopping mall space is anticipated to be turned over before yearend. Majority of the expected turnovers are located in Pasig and Bay Area.
  • Upcoming retail developments in the next 3 years will add an estimated GLA of 630,000 sqm. to the total retail stock. 43.2% of the total upcoming inventory is in Pasay City and 15.1% in Muntinlupa City/Alabang, with increments from Pasig, Makati, Taguig and QC.

 

INDUSTRIAL

Performance:

  • Demand for warehousing and storage spaces continues to increase as a result of the dwindling supply in ecozones and other private industrial properties within Metro Manila and other major investment destinations like Region IV-A (CALABARZON) and Region VII (Central Visayas).

Forecast:

  • Outlook for the industrial sector remains positive, backed by resilient business confidence, despite a softening domestic and export demand. Industrial activities are anticipated to further rise in the coming quarters, with retail trade as one of its major drivers, following the emergence of top international firms investing in the country including the world’s largest and most valuable retailer and famous online shopping site, Alibaba.
  • Further improvement in the production environment will depend on the movement of foreign exchange and the rapid completion of major infrastructure developments both inside and outside Metro Manila.

 


Ms Celia Rocamora, Operations Director
celia.rocamora@santos.knightfrank.ph
+63 2 752 2580 ext 174


Mr Paolo Abellanosa, Corporate Communications Officer
paolo.abellanosa@santos.knightfrank.ph +63 2 752 2580 ext 184