JLL’s Christophe Vicic shares what’s on the horizon for Philippines property market

JLL Phils. Inc. Country Head Christophe Vicic at last year’s PropertyGuru Philippines Property Awards

The insular life has never been more fun — or posh. Property seekers have renewed laser focus on the Philippines, Southeast Asia’s second-largest archipelago, as it continues to post some rosy fundamentals.

The country finished 2018 with yet another annual GDP hike of six-plus percent, with foreign direct investment coming in 8.4 percent higher than the year before. Manila has been proclaimed the world’s fastest-growing prime residential market, with luxe homes appreciating at a clip of 11.1 percent in the year to December.

Meanwhile, Philippine offshore gaming operators (POGO) from China are doing brisk business along Manila’s harbourfront, while American business process outsourcing firms remain lucrative tenants for office buildings both within the capital and in the provinces.

JLL Philippines says the residential real estate sector in the country is “predicted to thrive” in 2019 on the back of robust demand for upper-mid to luxury homes from locals and international property seekers alike. The consultancy’s country head, Christophe Vicic, was recently elected to chair the PropertyGuru Philippines Property Awards, which will be celebrating seven years of honouring the country’s outstanding properties in July.

The former CEO for JLL Russia, Ukraine & Kazakhstan spills to Property Report some of the insights he has gleaned from one of the region’s most established markets.

Which regions in the Philippines are in the pink for investors and property seekers?

Overall, the real estate market across the country have been registering growth. Outside Metro Manila, we have seen an uptick in property interest and activity in Clark, Cebu, Davao, Iloilo, CDO, and Bacolod, among others. Within Metro Manila, Makati CBD and BGC continues to be the preferred business and investment locations. Meanwhile, Ortigas Center, Bay Area, Muntinlupa City, and Quezon City have been drawing a lot of interest as well from both local and foreign real estate players.

What currently draws foreign HNWI to the Philippines’ residential sale market, especially in Metro Manila? On the flip side, what for you is the single biggest deterrent to foreign investment in Philippine real estate?

It’s still mainly the relatively affordable condominium prices and the solid appreciation of these assets overtime. Typical investors are Mainland Chinese, Singaporeans, Japanese, Americans, and Middle East, among others. One key hurdle is the foreign ownership restriction which limits the participation of prospective investors as they have limited influence on real estate projects.

Online gaming firms and multinationals are keeping vacancy rates of office spaces low; how do their presence buoy the residential leasing market?

Historically, sustained growth from MNCs have been the drivers of the leasing market due to the housing requirements of the expatriate population. Recently, the entry of POGOs have led to a surge in residential leasing demand as operators seek housing for their employees.

The BPO industry has had to contend with the rise of AI and other impediments. Should office developers start worrying and formulate contingencies based on online gaming firms?

What we’re seeing is a natural progression in the value chain as technology, including AI, have led to greater efficiency and productivity which has prompted industry players to upskill their workforce and perform more knowledge-based work. Nonetheless, AI and digitization of business processes still require human input, especially on the technical side. Office developers can remain to focus on providing facilities centred on IT as the need for computer and technology experts will continue to drive the IT-BPM industry.

On Build, Build, Build, has the government’s infrastructure drive lived up to expectations? If not, how soon can developers, investors, and home buyers reap the rewards of this programme? How can they cooperate?

While there have been faster approvals on projects, there’s also been a bit of a lag in terms of project implementation which is understandable, considering that these are large infrastructure projects that have a lot of moving parts that may influence the project timetable. Nonetheless, there are still notable projects that’s worth mentioning, namely, the Mactan Cebu International Airport expansion and Parañaque integrated Terminal Exchange. Developers can directly participate in these programs or position their upcoming developments as complements to these infrastructure projects.

Last year saw a growth in office leasing and logistics/warehousing transactions. What asset classes should investors be looking into this year?

Office would still be up there, supported by the sustained growth of the BPO sector, and introduction of new demand source, namely, the flexible workspaces. Within the residential space, dormitels have been garnering solid interest from both local and international players. Logistics and warehousing are still a hotbed as we expect the e-commerce market to grow and combined with the number of infrastructure projects that would connect cities and businesses.

What’s your outlook for Philippine real estate, especially residential, in the next 12 months?

Our outlook for the Philippine real estate market remains positive, underpinned by stable macro fundamentals that would support the growth of the sector. The BPO industry continues to grow and is expected to remain a major driver of the office market. Apart from the BPO sector, we have emerging demand sources such as online gaming and flexible workspaces. On the residential market, the sustained entry and expansion of BPO firms is expected to maintain healthy leasing demand from expatriate employees. In addition, the continued growth of the OF remittances is also supporting residential sale demand, particularly in the mid-tier segment. Meanwhile, both the BPO industry and OF remittances have been buoying consumer spending to support the retail market. Lastly, tourist arrivals are still on the rise and coupled with investments in infrastructure projects (road and airports) would maintain the positive performance of the hospitality market.

Learn more about the PropertyGuru Philippines Property Awards here: