MANILA, Philippines – Metro Manila ranks high among Asia-Pacific’s most attractive markets in real estate investment and development prospects, joining the region’s top bets especially in the residential, office and retail property segments.
Based on Urban Land Institute (ULI) and PricewaterhouseCooper’s research “Emerging Trends in Real Estate® 2014,” Manila ranked fourth— after Tokyo, Shanghai and Jakarta —among 23 regional markets rated on the basis of a city’s investment prospects. Manila climbed in this ranking by eight notches from 12th place last year.
Manila likewise moved a notch higher at eighth place in terms of development prospects, compared to ninth place last year.
John Fitzerald, chief executive of ULI Asia-Pacific, said during the presentation of the report in Thursday night that Tokyo and Manila were “big movers” in this year’s survey.
Manila’s favorable ranking was attributed to the Philippines’ fast-growing economy, increasing popularity of the capital region for multinationals seeking outsourced services and growing awareness that transparency and governance issues have improved. Manila is also seen benefiting from young demographics, strong capital inflows from overseas Filipinos and a workforce with cultural affinity with the West.
The research noted an increasing interest on emerging markets, in particular Indonesia and the Philippines, as alternatives to other traditionally more favored markets. “The reason? Cap rate compression continues to squeeze returns and with higher interest rates seemingly just around the corner, investors are drifting to markets and asset classes that can provide the kind of returns they are unable to tap elsewhere,” the report said.
Prime office rent was still well below the pre-global financial crisis rates but growing at 5-8 percent per year, the report said. Cap rates are between 9 and 10 percent. It noted a growing trend of office buildings being taken up ahead of completion.
The report noted that a lot of the recent action was focused on sub-markets like Fort Bonifacio, where vacancy rate was estimated at a meager 1 percent. Rent in this area was estimated to have risen from 50 percent of downtown Makati to 80 percent at present.
“The Philippines is drawing a lot of mentions this year within our report and there’s a perceived real turnaround in momentum here, although there’s still perspective that it’s hard to get money from the market. But it still ends up as the most preferred among the emerging markets,” Fitzgerald said.