Smooth sailing for real estate industry, according to Pinnacle’s latest research

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The homegrown real estate brokerage and consulting firm highlights key observations in its latest Market Insight.

August 7, 2019; Manila: The Philippine real estate market for the rest of 2019 and beyond will be marked with growth and stability, according to the latest research of leading home-grown real estate consultancy firm Pinnacle Real Estate Consulting Services, Inc.

The report, released today by Pinnacle, highlighted the country’s key macroeconomic indicators spelling positive growth for the industry over the coming months. According to Pinnacle research consultant and principal author of the report Jose Romarx Salas, the real estate market shall continue to grow due to real demand: “From BPOs and POGOs for office; strong demand from overseas Filipinos and expatriates, coupled with huge housing backlog for residential; record tourist arrivals for hotels; increasing local and tourist population combined with increasing spending for retail; and pent-up demand for industrial spaces from foreign and local manufacturers.”

According to Salas, the country’s positive business and political climate is reinforced by an upgrade from Standard & Poor’s, giving the Philippines a rating of “BBB+,” which is two notches higher than the minimum investment grade rating.

What’s driving the market?

According to Salas, the recently held elections removed a certain level of uncertainty in the market. “Most if not all real estate developers are positioning themselves to take advantage of the continuous economic growth,” he said.

The report cited reported 2019 capital expenditures (CAPEX) of the top developers as proof of the overall positive sentiment, including Ayala Land’s Php130 billion; the SM group’s Php80 billion; Megaworld Corp.’s Php65 billion; Vista Land’s Php60 billion; DMCI Homes’ Php31 billion; Filinvest Land’s Php30 billion; and Robinsons Land’s Php27 billion.

Salas added that even with the protectionist policies of Donald Trump, US-based business process outsourcing (BPO) companies continue to outsource to the Philippines. Another booming industry is the POGO, where a number of companies are partnering with mainland Chinese entities to operate here in the Philippines. The latter’s demand for office space is staggering: some now are looking for spaces as big as 10,000 sqm.

“In the early 2000s, BPOs were likewise viewed with suspicion, but were eventually accepted. In fact, new buildings were purposely built to cater to the needs and demand of the BPOs.”

According to Pinnacle research, Metro Manila’s total stock of Grade A office building or better have reached over 10 million square meters by the end of 2018, and overall vacancy across the various business districts improved to 6% by first half of 2019 from 7% by end of 2018.

Grade A stock in NCR shall reach 11.7 million square meters by end of 2019. Rents will range from Php700 to Php2,500 per sqm, with an overall average of Php850 per sqm per month.

On the residential front, residential property values has been increasing in the past three years. The Bangko Sentral ng Pilipinas’ Residential Real Estate Price Index (RREPI) has increased to 117 from its base of 100 in 2015.

“While the overall average growth is a decent 5.67%, condominium prices grew by 38.6% in the past three years, or an average growth rate of 12.87% per year.”

The report cited that cumulative condominium units in the past 10 years reached over 360,000 units, with an overall absorption of 90%. Pinnacle is forecasting that total condominium stock for the entire NCR shall reach approximately 395,000 units by end of 2019. Due to the strong demand from foreigners, especially mainland Chinese, absorption is seen to inch up to 94% this year.

All in all, political maturity coupled with investment-ready business climate will further fuel the demand for real estate. “While it is tempting to mirror the government to just ‘build, build, and build’, savvy developers will conduct their due diligence to incisively plan their developments up to the last square meter,” Salas concluded.

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About Pinnacle Real Estate Consulting Services, Inc.

Pinnacle Real Estate Consulting Services, Inc. is a home-grown real estate brokerage and consulting firm. It provides a full range of services to local and foreign investors, buyers, and real estate lenders. It is composed of a team of experienced professionals dedicated to enhancing the value of client investments throughout the Philippines. The company’s primary business lines are real estate asset management and brokerage, real estate closing and advisory services, property appraisal, research and consulting, property and facilities management, and non-performing loan (NPL) asset management, among others.

To know more about Pinnacle, visit its website.

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