RP is 'hottest real estate market in Southeast Asia

Written by LalaRimando

Tourism, offshoring and onshoring are driving the property market in the Philippines to the top of real estate investors' list, an executive of a global property consulting and research firm said.

Trent Frankum, general manager of the Philippine office of CB Richard Ellis Group (CBRE), a Los Angeles-headquartered real estate adviser to investors and occupiers, spoke about the topic, "The Philippines – the hottest market in Southeast Asia," during the Investment and International Property Expo in Hong Kong last June.

In the audience were property experts and investors from featured property experts and investors from global companies headquartered in Asia, Australia, and the UK."Investment opportunities in tourism, infrastructure, mining, and real estate remain high in the Philippines," said Frankum.

"Foreign investors are looking at the positive effects of the stable Philippine peso, increasing tourist arrivals, the BPO boom, and the positive effect of overseas Filipino worker (OFW) dollar remittances into the country.

"New hotelsIn 2007, tourists arriving in the Philippines reached a little over three million, a far cry from the years when tourist arrivals hovered at two million.

New markets such as those from Russia, Middle Eas, China, and Korea are expected to help in sustaining tourism growth.Projected tourism arrivals in 2008 is at 3.4 million, which will generate revenues of about US$5.8 billion.

Property companies have taken advantage of this boom as "New hotel and resort developments are currently in strategic business locations such as Makati City, Fort Bonifacio, and the Bay Area as well as top tourist destinations such as Cebu and Boracay, further enhancing industry prospects," Frankum said.According to Frankum, hotel room occupancy rates rose to 73.06 percent in 2007 from 71.95 percent in 2006.

New development projects include the US$153 million Kingdom Hotel, a combined hotel and residential condominium that will rise in Makati City.

Meanwhile, the offshoring and outsourcing boom continued to create opportunities in the residential and office markets.Almost 800,000 sqm for BPO officesMultinational companies that operate business process outsourcing businesses in the Philippines are pushing their expansion projects.

Frankum cited Accenture, a US-based IT company, which leased additional 1.3 million square feet.Other major offshoring and outsourcing service providers continue to develop sites in Metro Manila and Metro Cebu.

According to CBRE research, a total of 731,871 square meters of property in Metro Manila has been earmarked for new offshoring and outsourcing facilities this year, with 189,614 square meters already pre-committed before commencing construction."Offshoring and outsourcing will continue to drive demand for real estate, particularly in the office space market," Frankum said.

In addition, major financial companies such as HSBC, Citigroup and JPMorgan have been expanding Philippine sites of their respective customer support operations.

HSBC currently has four locations, which totals to 859,200 square feet, and plans to open more sites. Citigroup and JPMorgan, on the other hand, have 214,812 and 107,400 square feet of space leased, respectively.

Complementing the office construction frenzy is the residential market.In Makati alone, there are upcoming 18,143 residential condominium units coming in between 2008 and 2013. In nearby Fort Bonifacio, there are 33 residential condominium units being constructed between 2008 and 2012. That translates to additional 11,652 units.High construction costCBRE's optimism, however, will be put to test as prices of construction materials, especially steel, have almost doubled. Financing costs of property buyers or lessors are also expected to hike as the central bank is poised to increase interest rates to ease inflation worries.Property companies, such as Ayala Land, Megaworld and Vista Land, have already increased their prices from five to 20 percent.