More foreign companies investing in the Philippines in the next few years are expected to increase real property development in the country.
Real estate advisory and services firm CB Richard Ellis Philippines Inc. (CBRE), in a media forum at Makati City recently, reported that the growth of the real estate segment in the country last year was anchored on remittances from overseas Filipino workers (OFWs) and Business Process Outsourcing (BPO) companies.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that land-based and sea-based OFW remittances increased five percent or from US$22.9 billion in 2013 to US$24.3 billion last year. It is estimated that OFW remittances in 2016 will reach between US$25 million to US$26 million.
“We are also seeing the same number of revenue in the BPO sector by 2016,” said Rick Santos, chairman, founder, and CEO of CBRE Philippines. “Continuous expansion of BPOs significantly accelerates in terms of the service sector which has grown 3.3 percentage point in the GDP (gross domestic product) and has been the driver of economic growth in 2014.”
OFWs fuel the demand for low to mid-market housing in both vertical and horizontal developments. In an interview, Alexandra Kantindig, manager for investment properties and capital markets for CBRE Philippines, said low to mid-level market consumers purchase condominium units either for themselves or as an investment rented to a third party.
BPO employees, as well as college students, are now renting units in vertical developments, transforming traditional ‘bed spaces’ into what is now known as ‘condormitels.’ Katindig said that trend started around three years ago where three or four call center employees or students, or a mix of both, would rent condo units.
She added that this trend continues to grow due to the proximity of condominium developments located within the central business districts (CBDs) and universities in Metro Manila and other key cities in the country.
Data collected by CBRE Philippines shows that the upcoming retail supply for Metro Manila until 2017 is 655,689 sqm, or more than 55,000 units are expected to be turned over by developers by the end of this year. Among the cities with the biggest share of this supply are Makati, Quezon City and Taguig.
Also, the increase of BPOs translates to the arrival of expatiates as multinational companies expand. This market adds to the demand for condos, particularly on luxury residential spaces.
Proof of this are the arrival of Pottery Brand and Crates & Barrel which are famous luxury furniture brands that have entered the Philippine market last year. However, high-end projects are still quite limited.
Aside from the BPO sector, Santos said that the increase of tourist arrivals in the Philippines is another factor for developers to create projects for the hospitality and gaming sector. Latest data from the Department of Tourism (DOT) recorded almost four million visitor arrivals to the country from January to October 2014.