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Manila improves ranking in real estate

Published on Wednesday, 12 December 2012 23:00
Written by ALBERT CASTRO
Malaya Business News Online - Philippine Business News | Online News Philippines
Metro Manila has become more attractive place for real estate investment, according to the latest survey of real estate think tank United Land Institute.
Coming from a 18th place in the past ranking, the Philippine capital zoomed to 12th place in this year’s Emerging Trends in Real Estate Asia Pacific 2013, its highest rank since the survey was initiated seven years ago.
Metro Manila’s status as a real estate investment and development destination in Asia Pacific has improved on the back of robust economic expansion, improving national government transparency and a strong outsourcing and offshoring sector, according to a regional property survey.
The city’s performance was buffered by the growing national economy, transparency and business-friendly regulatory environment, and the country’s “on-going success --- an ‘eye-opener’ --- in attracting foreign corporate clients to its business process outsourcing (BPO) facilities.
“Bureaucracy has declined and transparency has improved considerably over the past years currently ‘the best market’,” said ULI citing an unnamed investor in its report.
“As a result, Manila’s appeal as an investments destination climed from the near bottom ofthe rankings in previous years’ polls,” it added.
ULI also said that of the 22 markets included in the report, Manila has ranked 9th for development prospects, “a rapid rise from near the bottom of the rankings in previous years’ polls.”
“A large casino development underway in Manila has provided impetus to the development sector and is expected to boost tourist arrivals as it is completed in phases over coming years,” it also said.
ULI, however, noted that though investment prospects is encouraging across all sectors in the Philippines, “government regulations that bar foreigners from holding majority landownership continue to deter international investment.”
“What is more, local developers have little incentive to partner with foreigners, given the availability of ample liquidity from domestic sources. Foreign opportunities, therefore, are likely to remain restricted to the gaming and BPO sectors. Admittedly, both present large opportunities, with the latter currently accounting for some 70 percent of new office take-up in Manila,” it said.
Manila meanwhile ranked second in apartment residential prospects, fifth in retail prospects, sixth in office prospects, eight in hotel prospects and ninth in industrial and city development prospects.
ULI said that the growing appeal of Manila “is part of a greater trend documented by the report that shows investors turning to secondary markets and emerging cities such as Manila in search of returns.”
“While steady economic growth, rising incomes, and stable or increasing property values are all contributing to positive real estate investor sentiment across Asia Pacific, Emerging Trends notes that this outlook is tempered by concerns that prime assets in key markets are becoming overpriced. For instance, capitalization rates across Asia remain more compressed than in many western markets, and yields for core office stock in cities such as Hong Kong, Beijing and Singapore are returning as little as two percent,” it said.
“With high rents, high capital values, low yields, and an abundance of local capital, many international investors are struggling to see attractive investment opportunities in Asia Pacific’s prime real estate markets,” meanwhile commented ULI Trustee and ULI North Asia vice chairman Richard Price, Chief Executive, Asia Pacific for CBRE Global Investors.
“As a result, investors are expanding their horizons as they seek compelling investment opportunities. Some are looking at frontier markets such as Indonesia, while others are revisiting often overlooked capitals such as Kuala Lumpur and Bangkok, which explains the strong showing for these locations in this year’s report. Secondary markets such as Kowloon in Hong Kong and second-tier Chinese cities are also experiencing increased interest from international buyers. At the same time, core investment markets in many mature, western markets are seeing a surge in demand from newly formed Asian Institutional Investors seeking to capitalize on the post-global financial crisis corrections there,” he added.
Judith Lopez, chairman and senior partner at Isla Lipana & Co., Pricewaterhouse Coopers (PwC) member firm, said “Manila is in the midst of a property boom.”

“It’s the best that we’ve seen in decades—clearly a sign of the increasing confidence in our economy. The gross domestic product (GDP) of the Philippines expanded 7.1 percent year-on-year in the third quarter of 2012, the fastest pace since 2010, driven by higher household expenditures, construction and investments. This is nearly the same pace as China and is even the best in Southeast Asia—it shows the Philippines’ strong economic growth. The government’s transparency has significantly improved, making the country more attractive to foreign investors. The positive outlook in Manila’s real estate sector is mirrored by the great opportunities presented by the business process outsourcing (BPO) and gaming sectors over the next two years,” she said.
PwC is a partner of ULI in the survey.
The attraction of Manila can be gleaned in the volume of leasing according to Jones Lang LaSalle.
David Leechiu, Jones Lang LaSalle country Head, said that as of October, the firm has tracked 413,000 sqm. of office leases, a 15 percent rise from 2011 so far.
“With several more leases expected to close before the year ends, leasing activity has exceeded our forecast. Further, we are seeing confident investment sentiment not just in office development but also in the acquisition of property for future development, whether it be for mixed use, commercial, residential, hospitality, retail or industrial,” he said.
Jakarta topped the 2013 rankings for both investment and development for the first time, followed by Shanghai, Singapore, Sydney and Kuala Lumpur, to complete the top five.
Emerging Trends is based on the opinion of more than 400 internationally renowned real estate professionals, including investors, developers, property company representatives, lenders, brokers and consultants.
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