MANILA, Philippines - The Philippine real estate market is now the best it has been in 20 years, according to property consultant CBRE Philippines.
CBRE Philippines chief executive and chairman Rick Santos said the Philippines is "no longer the sick man of Asia but now the sweet spot for investors."
"I've been back in the Philippines for 20 years now and this is the best real estate market we've seen. We think this market has legs and we're confident in the next 5 years. All eyes are now moving from BRIC (Brazil, Russia, India, China) economies into TIP (Turkey, Indonesia, Philippines) markets," he said, in a press briefing on Wednesday.
The housing sector continues to benefit from strong demand, as more Filipinos are able to buy houses due to low interest rates and affordable financing schemes.
"The Philippines is going through a democratization of the housing industry - from a nation of renters, we're going to a nation of owners," Santos said.
Pre-leasing is back
A bright spot for the Philippine property market is the office sector. For the first time in years, companies are pre-leasing office space in buildings that have yet to be completed. This is attributed to the continued expansion of the business process outsourcing (BPO) industry in the country.
"There's so much demand in the office sector, buildings are 100% leased, not just small buildings but large buildings are 45% to 50% leased, which is incredible. Most buildings don't even lease up until 1 or 2 years after completion," Santos said.
CBRE has seen a surge in pre-leasing commitments in the central business districts, not just in Makati, Bonifacio Global City and Quezon City, but also in Cebu, Davao and Clark. Pre-leasing activity usually happens within 6 months before a building is completed.
John Corpus, CBRE director for global corporate services, said there is tight supply of office space in the business district with an average 96% occupancy rate, and there's no sign of a slowdown.
Companies, particularly those in the BPO industry, are scrambling to secure much-needed office space. Of the 293,000 square meters of anticipated office supply to be available this year, around 232,000 square meters have already been pre-committed.
For instance, in Makati, Glorietta 2, which is set to open in the fourth quarter of this year, and Glorietta 1, which will open in the first quarter of 2013, are both already 100% pre-leased.
In Bonifacio Global City, Megaworld's Science Hub 1 and 2 are already 100% pre-leased, while Eight Campus A and B, which will open in the 4th quarter of 2012 and 2nd quarter of 2013, are also 100% pre-leased.
Other buildings such as SM Megamall BPO and Filinvest EDSA in Ortigas; UP Ayala Technohub K in Quezon City and Two Ecom in Bay Area, Pasay, are likewise leased out.
"We urge developers to push through with their planned projects and to avoid any delays and to capture all potential investments in the country... Office market will continue to be active and the next 2 years is guaranteed to be at its peak," Corpus said.
Potential in 'green' buildings
As more multinational companies open BPO offices in the Philippines, CBRE anticipates a growing demand for "green" buildings in the Philippines.
Santos said a large portion of the take-up of new office space is from BPOs, and 75% of that would be from multinational companies. "The multinational companies, like Bank of America, HSBC, WellsFargo and JPMorgan, a lot of them would want LEED buildings. This will create a large market for LEED buildings," he said.
LEED refers to Leadership in Energy and Envrionment Design, the mostly widely used green rating system in the world.
Joanie Mitchell, director for global corporate services, said there is a misconception that going green would entail more costs. "Cost is perceived to be the biggest barrier to building green (buildings) but sustainable construction is now near cost-neutral," she said.
There are only 5 LEED certified buildings in the country, including the Asian Development Bank, Nuvali One Evotech, Shell Shared Services Office and Texas Instruments in Baguio and Clark. Zuellig Building in Makati, which will open in October, and BTTC Centre in Greenhills are both pre-certified LEED Gold.