Boston, MA -- (SBWIRE) -- 04/15/2014 -- We have a positive outlook for the Philippines' commercial real estate sector, as the country's strong economic growth, growing business process outsourcing (BPO) and offshoring industries and increasing integration with the Association of South East Asian Nations (ASEAN) region combine to make the country an attractive investment destination.

These factors, as well as increasing numbers of tourists and remittances from Filipinos working abroad, should boost all the commercial real estate sub-sectors we cover: office, retail and industrial.

However, there are downsides to our optimistic outlook. Foreign direct investment remains fairly low, and political instability can dampen investor interest. Meanwhile, the business environment remains opaque, and clarity on planning rules would be a positive. The country still has no real estate investment trusts (REITs), which reduces opportunities for investment in the sector. Although REIT guidelines were introduced in 2009, no REITs are yet registered. However, in early 2014 it was reported that the Philippine Stock Exchange was planning to request that REIT legislation be made less stringent, and we are optimistic that there will be some development in creating a REITs market.

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The Philippines office real estate market is driven largely by demand for the BPO industry, which we see increasing over our forecast period, although we note that it is subject to influence by external factors.

Meanwhile, the retail market will be driven by the country's strong forecast economic growth and rising consumer spending, as well as Filipinos' taste for organised, Western-style retail.

The industrial real estate sub-sector has not fared as well as the other two in the recent past, but we believe that things are now looking up, and note increased interest from real estate developers in this area. ASEAN integration provides scope for rising demand in the longer term.

While we expect demand to remain strong in the cities we cover, the capital, Manila, Makati (the financial centre) and Cebu (a centre of BPO and industry), we note that as these cities' real estate sectors become developed, interest will likely rise in developments elsewhere in the Philippines.

Recent Developments

- In October 2013 the Philippines' Securities and Exchange Commission (SEC) approved the merger of SM Prime Holdings and SM Land, creating one of the largest property firms by market capitalisation in Asia.
- Daiichi Properties has begun work on its One World Place project in Bonifacio Global City. The office building is due to be completed in early 2015.
- In early 2014, motorcycle distributor Norkis announced its first venture into the real estate market. The Norkis Cyberpark, in Mandaue city, part of the Cebu metropolitan area, will have five office towers and will cater for BPO and other office needs.

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