Rediscovering investment opportunities in real estate

Moving closer into the second half of 2021, the notion of economic recovery is on everyone’s minds, particularly as the government’s COVID-19 vaccination program commences. In the real estate market, where office and commercial spaces have borne the brunt of the pandemic, such a recovery could be close, both in and out of the metro.

BusinessWorld Insights, in partnership with Alveo Land, hosted a webinar titled “Investing on Next Wave Cities: Emerging Potential for Real Estate” that attempted to chart the immediate future of the country’s property sector, especially that of emerging markets outside of the National Capital Region.

Claro Cordero, head of research for Cushman & Wakefield, said that foreign companies, particularly those in the Information Technology Business Process Management sector, are attracted to the upcoming infrastructure projects in areas like Pampanga, Laguna, Cebu, and Davao.

Markets like Pampanga, Laguna, Cebu, and Davao are attracting investments from major developers. Claro Cordero, head of research for Cushman & Wakefield, said during the exclusive webinar that foreign companies, particularly those in the Information Technology Business Process Management (IT-BPM) sector, are attracted to the upcoming infrastructure projects in these areas, along with their young and educated workforce.

“The Philippines is still one of the most attractive emerging markets, not only in the Asia-Pacific region but also in the rest of the global economy. Especially since the Philippines’ very young population is expected to provide an ample source of healthy workforce for at least the next twenty years,” he said.

Ongoing government projects like the NLEx Harbor Link, Metro Manila Skyway Stage 3, Metro Manila Subway, North-South Commuter Railway Project, Malolos-Clark Railway Project, and the Laguna Lake Highway, Mr. Cordero noted, are pushing investors to the north and south of the capital.

“The IT-BPM industry continues to be a strong demand driver for office space in the country, averaging 500,000 square meters. The industry also continued to expand in 2020 amidst the COVID-19 pandemic,” Phillip G. Añonuevo, executive director for commercial leasing at Leechiu Property Consultants, Inc., added.

In 2020, he pointed out, IT-BPM demand in the provinces accounted for a record 43% of the total IT-BPM take-up in the country. The appeal of such markets are bolstered by the availability of PEZA buildings, pushing companies to acquire office spaces there. Iloilo accounted for the biggest take-up in the country, with Cebu, Clark, and Davao following behind.

“Last year, the demand for office space was just around 182,000 square meters. We’re hoping that would normalize to maybe half a million square meters next year, and three or four years down the road. It’s entirely possible that we go back to the higher levels of demand, which would be in the million square meters every year that we experienced in 2018 and 2019,” he said.

Mr. Añonuevo specifically cited three key areas that show great investment potential in the near future: Cebu, Pampanga, and Davao.

“Cebu makes for a good case study with regards to real estate investments. It has all the fundamentals in place: very good government support, and available real estate. Cebu is a good example of a city that is prepared, and has investors who are confident in developing properties there. As a result, Cebu is host to many of the world’s largest companies,” he said.

Phillip G. Añonuevo, executive director for commercial leasing at Leechiu Property Consultants, Inc., cited three key areas that show great investment potential in the near future: Cebu, Pampanga, and Davao.

Pampanga, meanwhile, benefits from a slew of recent infrastructure developments, most notably the upcoming Clark International Airport, and its proximity to Metro Manila. Davao has continually proven itself as a city with solid fundamentals and the rise in the number of master-planned townships in these areas further enhances their foreign appeal.

“Outsourcing to the Philippines will continue to be a viable business strategy for many companies in the next ten or twenty years,” Mr. Añonuevo said.

“I believe that master-planned communities are a very attractive real estate investment, primarily because employers would want to be able to provide the best environment for their employees. It’s just a matter of time before companies become confident again in investing in new office buildings, and we will see the same growth in real estate in the office sector as in previous years.”

The makings of an emerging city

Moving past the pandemic, Mr. Cordero pointed out opportunities in the real estate industry that investors can take advantage of, aside from the expected surge brought about by IT-BPM activities.

The high-end residential segment is expected to ride out the crisis, as such developments provide a safe environment that can support various lifestyles. The industrial segment, meanwhile, is propped up by the boom in e-commerce, increasing the demand for developments near sources of labor. Retail and hospitality segments, however, should expect recovery to take much longer.

“We think that there are various drivers of success in a city that will enable investing in these new wave cities a worthwhile endeavor,” he said.

“We need to look out for these cities that have a lot of investment activities being poured in, cities that put a premium on social inclusion and urban well-being, health equality, cultural and environmental diversity. We need to look at cities with environmental and climate resilience. Cities should have proactive and coordinated prevention, adaption, mitigation strategies to address climate change to safeguard investments,” he added.

Cities with competitive advantages that increase their capacity to generate talent, knowledge, and innovation, meanwhile, are cities that will attract not only co-minded investors but aspiring residents and locators, making it a self-sustaining development. He encouraged investors to look for such developments outside Metro Manila as they would provide a more stable investment than the currently-volatile equity market.

“Investing in real estate during this pandemic also entails a social responsibility as it helps in accelerating economic recovery and growth. Right now, we need to grab the opportunity while interest rates are still very attractive and we need to take advantage of the massive fiscal stimulus that the government is also offering. Take advantage of that and we can do our share in helping the economy regrow in no time,” he said.

Alveo Land, the country’s leading innovative real estate developer, offers a vibrant portfolio of groundbreaking property developments that provides upscale living and working spaces within various thriving and emerging growth centers around the country. Outside the National Capital Region, it has noteworthy projects located in Cagayan de Oro, Cavite, Cebu City, Davao City, Laguna, and Pampanga. For more details, visit www.alveoland.com.ph.