The Philippines’ Real Estate Industry Continues To Be A Key Driver Of Economic Growth.

The Philippines’ real estate industry continues to be a key driver of economic growth.

Since the passing of Republic Act No. 9856 in 2009, the real estate market has been anticipating the realization of the Real Estate Investment Trust (REIT). A REIT is a publicly listed stock corporation that owns income-generating real estate assets, such as malls, offices, and hotels. Envisioned to promote the development of the capital market, REITs are instruments to generate capital. REIT companies are also mandated by law to distribute 90% of their retained earnings as dividends, which benefits investors.

With the recent move by the Government to amend rules on REITs, developers have been increasingly looking at listing their income-generating assets as REIT companies.
“REITs have the power to democratize the Philippine property market, allowing the individual investor on the street to invest in high-value real estate assets along with the big players.”“We believe REITs will substantially boost the Philippines’ capital market. New capital for developers will enable expansion of the real estate sector not only in Metro Manila but also in the provinces.”

Logistics: 626% growth in investments recorded in 2018

The logistics and industrial real estate sector has been going through a major transformation over the past few years driven by growing middle class, booming e-commerce market and the decentralization trend outside of Metro Manila. Amid challenges in infrastructure and connectivity, the sector has seen strong demand for last-mile delivery hubs, inner-city distribution centers, cold storage and warehouse facilities.

Investments into the transportation and storage industry grew by 626% to PHP 129.6 billion in 2018 from PHP 17.8 billion in 2017, according to the Philippines’ Bureau of Investments.

To increase efficiency and profitability, warehouse operators are adopting new technology such as the Automated Storage and Retrieval Systems (ASRS) and adding new services. In addition, developers are exploring the fringes of Manila and the regions for the next site of their industrial investments, capitalizing on rising demand in various hubs across the country.

Kash Salvador, Associate Director of Investment & Capital Markets at Santos Knight Frank says: “More warehouses are now needed outside Manila, including Visayas and Mindanao, to connect suppliers with customers. The scarce industrial land in Metro Manila, the drive towards decentralization and the huge demand in the e-commerce and traditional retail sectors offer huge opportunities for players in the logistics and real estate sector.”

Hotels: 10,700 upcoming rooms in Manila and Cebu until 2023

Tourism continues to be an attractive sector for investors. Foreign tourist arrivals grew by 7.6% in the first quarter of 2019 to 2.2 million, the majority of which came from South Korea (24%), China (21%) and the U.S. (13%), according to the Department of Tourism. Filipinos are also seen as a strong market for the industry, with 60 million domestic trips made by locals every year.

With a rosy outlook for tourism, major destinations such as Manila and Cebu have witnessed a rising number of new hotels which will cater to expected growth in demand. Manila has the greatest number of upcoming hotel rooms with 6,970 in the pipeline until 2023, concentrating mainly in the Bay Area, Makati, Ortigas, and BGC.

Meanwhile, Cebu has at least 3,806 rooms in the pipeline until 2023, the majority of which will be in Lapu-Lapu City. Two integrated resort developments – Isla dela Victoria and Emerald Resort & Casino – are expected to increase tourism arrivals in Cebu.

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