Property boom in the Philippines

The Philippines is in the midst of a property boom that is shifting Manila’s skyline upwards and redefining its status in the world as a viable business hub after a drawn out and undesirable reign as  the “sad-sack” of Southeast Asia.

Office space leasing this year is predicted to hit new heights, setting a record of 400,000 to 450,000 square meters, up 25 per cent from last year, according to property managers and consultancies Jones Lang LaSalle and CBRE Philippines, one of the country’s largest firms in that segment.

Pointedly, increased confidence in the rising Philippine economy, which enjoyed 6.1 per cent GDP growth the first half of 2012, has led to office space being snatched up even before completion.

“Pre-leasing is back,” said Rick Santos, chairman of CBRE was quoted by Reuters. “We are now experiencing the best real estate market in the Philippines in the last 20 years.”

From fort to concrete forest

The 24/7 din of construction work in Manila is most pronounced in Bonifacio Global City, once a large army base on the outskirts of Metro Manila auctioned off by a financially pressured government in the mid-90s. Since ownership was transferred to Ayala Land Inc six years ago, the fort has begun to creep upwards into a concrete forest of new property developments that rival its more developed and oversaturated neighbour, Makati City, Manila’s main business district that began rising in the 1970s.

Rents in Makati have risen nearly 30 per cent, but are still below the pre-global crisis peak prices of $29 per square meter seen in 2008. This makes Manila’s business center drastically more affordable than other hubs in Asia, though lack of infrastructure and public transport remain a constant annoyance.

If hopes for Makati are sanguine, Bonifacio’s lure seems irresistible, especially compared to the cramped quarters available in Makati. A “work in progress,” Bonifacio now boasts rents that stand at $19.50 per square meter and are predicted to quickly meet up with its sister city. The Philippines’ first Lamborghini showroom recently opened in Bonifacio, now shoulder to shoulder with Ferrari; Hyatt and Shangri La hotels are getting their feet in soon. Spacious parks, international fine dining and microbreweries dot street corners in the up-and-coming neighbourhood, setting in starkly aside from the rest.

A call center’s playground

The boom in Philippine property market is being supported by a number of favourable fundamentals. Since coming to power in 2010, President Benigno S. C. Aquino III has driven an anti-corruption campaign that has rehashed the country’s Wild West image.

Low inflation, low interest rates, a stock market that grew 20 per cent last year and a readily available supply of English-proficient labour are all additional draws.

But by taking a look at the young crowd patronising the 24/7 coffee shops in Bonifacio, the real source of the boost is clear.

Some 80 to 90 per cent of office space in the country is occupied by the BPO sector, now one of the largest in the world, a direct competitor to India. The industry is a major source of employment for recent graduates, and is forecast to double from its current employment base of 600,000 by 2016, leading to a continued demand in new office space.

Outside of the BPO industry, expanding banks, insurance firms and representative offices are also adding to the boom.

In the regions outside of Manila, still more transformation is undergoing in industry parks, especially in manufacturing, providing jobs for those who cannot make it into a BPO position, proving that the rise in Manila is not just vertical but horizontal, moving out into the peripheries of this renewed nation.