What’s the state of the country’s commercial and residential real estate?
On commercial real estate, Rick Santos, chairman, CEO and founder of Santos Knight Frank, reports: “Manila has been identified as one of the most competitive locations for office tenants in terms of prime office rent. Its prime office rent (P1,100 per sqm. per month or US$21.5) was the 14th lowest among 75 global markets. Manila ranked even higher at seventh place in terms of total occupancy cost (P1,275 per sqm. per month or US$24.9), behind Cape Town (South Africa), Muscat (Oman), Johannesburg (South Africa), Kuala Lumpur (Malaysia), Nairobi (Kenya), and Manama (Bahrain).
What’s the buzz?
If you’re working anywhere in the crowded, bustling metro, you’re probably familiar with these latest buzzwords: co-living, co-working, co-retailing.
Santos Knight Frank notes that because of rising rents and prices, technology, and increased mobility, the co-living, co-working, and co-retailing sectors will continue to grow in Manila. Fact is, co-living has become an alternative flexible accommodation option particularly among millennial workers. With the worsening traffic and transport problems, it’s a very convenient solution, indeed, for employees who need a place to stay that’s close to where they work.
Santos Knight Frank cites SM’s MyTown and Ayala’s The Flats as among the main players in co-living space. These are located either within the central business districts (CBDs) or lie on the fringes of business hubs.
The growth of the office market in CBDs, primarily in Makati and Bonifacio Global City, has allowed co-living to thrive. Over 1.1 million sqm. of new office space is estimated to come online in Metro Manila in the second half of 2019.
“There’s a shift from the old industrial desk to co-working spaces,” Rick asserts. “Our office spaces are evolving to an open seating that allows for more interaction among employees and more freedom to exchange ideas. Enhanced connectivity and increased mobility brought about by technology (your laptop, smart phone, tablet) practically allow you to work anywhere, as long as you can find a table and a comfortable seat. You don’t have to maintain a large space to have those meetings; you just have to schedule it at certain times of the week, where you can all converge in one location. After all, your sales team is out on the road a lot, their desks are empty, your office is empty.”
Your office away from office
Coffee shops are fast becoming instant offices (think Starbucks or Coffee Bean & Tea Leaf, where you may chance upon corporate people forever in a huddle). Some developers have thought of using their space more efficiently by charging customers so they can stay longer, enjoy better facilities, have access to faster WiFi.
In terms of luxury residential space, Manila continues to outperform other Asia Pacific markets. The latest luxury residential properties in Makati and Bonifacio Global City include the Aurelia Residences, a joint venture of Shang Properties and Robinsons Land, and The Estates Makati by SMDC and Federal Land.
And now, let’s leave the good old metro and talk about the Next Wave Cities. “A lot of the development growth has been in Metro Manila, but now, people are going outside — to Clark, Cebu, Davao,” says Rick. “That’s where a lot of companies are going. It’s a good opportunity for developers and also companies to expand outside the congested Metro Manila.”
The outsourcing industry continues to expand outside Metro Manila, and a more diverse group of BPO tenants are choosing to invest in Next Wave Cities, so affirms the Santos Knight Frank report. The BPO industry currently provides 1.3 million jobs directly and 4.1 million jobs indirectly. Around 25 percent of the BPO employees are primarily in Baguio, Clark, Naga, Puerto Princesa, Iloilo, Cebu, Bacolod, and Davao. These provincial hires are expected to grow to half a million by 2022.
Morgan McGilvray of Santos Knight Frank observes, “Recently, we have seen an interesting development in which the mix of BPO tenants in the Next Wave Cities is changing. While third-party BPOs and local BPOs have traditionally dominated the provincial markets, captive centers (those that support internal company operations) have now begun moving into cities such as Iloilo, Clark, and Naga, which is a vote of confidence for those locations.”
Key to attracting BPO companies is, of course, cost competitiveness. Metro Manila’s average rental rate of P1,100/square meter/month remains one of Asia Pacific’s most inexpensive, according to the Knight Frank Asia Pacific Office Rental Index Q2 2019. Outside Metro Manila, average rents in the Next Wave Cities range from only P350 to P550/square meter/month in places like Iloilo, Bacolod, Clark, Cagayan de Oro, and Davao.
Certainly making waves is Iloilo, a charming old city that has kept its date with history. Here, at least 69 BPO companies support around 27,000 direct hires.
Rick Santos affirms, “BPOs help create an ecosystem of growth, and that is especially magnified in the provinces, where the industry spurs not only real estate expansion but also economic development. Encouraging decentralization will accelerate urban development in the region and uplift more households into the middle class.”
So, how does Santos Knight Frank see the future of real estate in the Philippines?
It’s positively looking up, especially in the next three to five years!
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Santos Knight Frank, the country’s pioneering real estate services company, is hosting the Knight Frank Asia Pacific Conference on Nov. 5-7 at Okada Manila. The biennial conference is expected to bring together some 500 international real estate professionals from more than 60 countries across Knight Frank’s global network, including the US, Europe, China, and Southeast Asia.