Over the past few years, the industrial sector has shown resilience. It is one of the property segments that was able to weather the adverse impacts of the pandemic. The segment is also likely to receive a major boost from the Marcos administration’s goal of attracting more foreign manufacturing investments. The national government needs to send a strong signal to global manufacturers that the Philippines is open for business. Property firms with strong industrial presence should take advantage of investment pledges likely to materialize in the next 12 to 24 months and maximize improving infrastructure connectivity across the country, especially with the planned modernization of airports, expressways, railways, and the eventual completion of the Metro Manila subway. These public projects should facilitate just-in-time deliveries and support the ever-growing demand for cold chain facilities across the Philippines. A crucial aspect of our industrial sector, if you ask me, given that the Philippines is primarily a household consumption-driven economy.
The Philippine government intends to diversify its sources of foreign pledges and in the process secure more manufacturing investments. The country’s investment promotion agencies (IPAs) have been promoting the Philippines’ competitiveness as an investment hub and this should help the country attract more foreign investments which should boost industrial take-up in the country’s primary industrial corridors.
Colliers encourages industrial park developers to expand especially in central and southern Luzon to capture manufacturing commitments. Property firms with an industrial footprint should follow the government’s program of attracting more investments from non-traditional trading partners. Developers should also coordinate with IPAs to identify pledges likely to materialize in the near term and eventually take up industrial space.
Diversity is key
Property firms should diversify as they consider expanding their industrial presence. Aside from traditional investment partners such as the United States and Japan, industrial park developers should remain aggressive in enticing investments from non-traditional sources of investments including European countries.
In our view, property firms should take advantage of the government’s thrust of attracting foreign manufacturing firms that are looking for viable industrial sites outside of China. PEZA said it is enticing more than 4,000 Taiwanese firms to invest in the Philippines through the “China Plus One” (C+1) strategy. PEZA has also been receiving investment pledges from non-traditional partners such as Australia, New Zealand, Netherlands, and Germany. Diversification is a major initiative of this administration.
Identify which investment commitments are likely to materialize
Industrial park developers should constantly coordinate with IPAs to identify which among the pledged commitments are likely to materialize in the next 12 to 24 months. Some of these pledges, including manufacturing projects, take time before materializing. Colliers recommends that industrial park developers identify foreign investment commitments likely to actually flow into the country and touch base with the potential industrial locators to identify their industrial land size and warehouse fit-out requirements.
Modernize warehouses
Colliers has observed strong pre-leasing for modern warehouses specifically from logistics and e-commerce firms. We recommend that developers modernize their warehouses to accommodate the requirements of potential locators. Among the features of these warehouses include a floor-to-ceiling height of between 12 and 14 meters, up to 5 tons floor load capacity, a fire sprinkler system, and light illumination. Developers should also consider modernizing their facilities by adopting Industry 4.0 practices. These include further automation of facilities and the adoption of advanced robotics, conveyor, and cloud data systems which should ease storage and retrieval of items in warehouses.
Continued expansion of industrial foothold
From 2024 to 2026, we expect the average annual delivery of 120 hectares (297 acres) of new industrial supply in the Cavite-Laguna-Batangas (CALABA) corridor and Central Luzon. Among the industrial parks likely to be completed include Batangas Technopark, Filinvest Park-Ciudad de Calamba, and the expansions of Cavite and Pampanga Technopark.
Realized investment to drive industrial take-up
Data from the Philippine Statistics Authority (PSA) showed that approved foreign direct investments (FDI) in 9M 2023 reached PHP494.6 billion (USD9.0 billion), up from PHP68.3 billion (USD1.2 billion) during the same period in 2022. The manufacturing sector accounted for about 13% of total pledges. In our opinion, these investments should boost industrial space absorption, particularly in CALABA and Central Luzon. According to PSA, the CALABARZON and Central Luzon regions cornered more than 30% of foreign investments during the period. These regions are the Philippines’ major industrial corridors.
Colliers also believes that the Philippine industrial sector will likely benefit from the United States CHIPS and Science Act which aims to boost the country’s research and semiconductor manufacturing. Semiconductor manufacturers currently operating in the United States are considering the Philippines for their expansion plans. Among these firms include Murata, which will build a new production plant in the First Philippine Industrial Park (FPIP) in Batangas, and Texas Instruments which is investing USD1 billion for the expansion of its facilities in Clark and Baguio. Furthermore, President Marcos received USD250 million worth of semiconductor investment pledges during his November 2023 trip to the United States. These should further buoy the Philippines’ competitiveness as a semiconductor manufacturing hub and boost the Philippines’ stature as a prime manufacturing hub in the region. With Brent Respicio (Research Analyst, Colliers Philippines)
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