Logistics, warehousing aiding slow recovery of Philippine property

01, Mar. 2021

Many private and public construction projects in the Philippines were put on hold in the second and third quarters of 2020 due to the strict lockdown imposed by the government. This affected the supply of residential as well as office units. Photo taken in June 2020 in Mandaluyong City in capital Metro Manila. (NNA)
Many private and public construction projects in the Philippines were put on hold in the second and third quarters of 2020 due to the strict lockdown imposed by the government. This affected the supply of residential as well as office units. Photo taken in June 2020 in Mandaluyong City in capital Metro Manila. (NNA)

By Darlene Basingan

MANILA, NNA - The boom in e-commerce as well as the anticipated mass inoculation against COVID-19 will make logistics and warehousing properties the most stable real estate sub-sector this year in the Philippines, according to industry players.

However, traditional property asset classes such as offices, retail space and homes will see only a slight recovery from the pandemic fallout by 2022.

Kash Salvador, a director for investment and capital markets of estate agency Santos Knight Frank, told NNA, “Whereas before developers naturally have looked to traditional asset types such as office and retail for their expansion, more and more developers now are turning towards industrial and logistics as a defensive strategy.”

The unceasing growth of e-commerce is driving the growth of logistics and storage space as people have continued to rely on online shopping because of lockdowns and distancing measures, said Salvador.

He said many developers have approached his company for advice on turning their lands for industrial and logistics use.

Lobien Realty Group Inc., another property agency, estimates the space requirements for a logistics facility currently range from 1,000 square meters to 10,000 sq. meters in Philippine capital Metro Manila and surrounding areas.

The demand for warehousing will likely surge in the next 12 to 36 months, according to Colliers Philippines, another property consultant. It expects an additional 179,800 sq. meters of warehouse space to be offered in Metro Manila alone.

According to Colliers, firms have continued to locate their warehouses near business districts in the capital region as it is more convenient and accessible to commercial areas.

Demand for smaller warehouses is also growing, noted Colliers. Mall owners who lost tenants during the pandemic are repurposing their open spaces to serve as fulfillment centers for logistics and consumer firms.

“We’ve seen movie theaters being converted into storage facilities,” Calvin Javiniar, a senior director for capital markets and investment services of Colliers, said during a press briefing in early February.

Expectedly, investments in logistics and warehousing are soaring.

Citing data from the Philippine Statistics Authority, Colliers said approved investments in manufacturing, transportation, and storage in the first nine months of 2020 jumped to 67 percent from 16.9 percent the year before.

Salvador of Santos Knight Frank believes the logistics involved in the vaccination campaign will drive up growth in the sector.

Also, cold chain facilities are expected to increase this year as demand for perishable food items and groceries continues to rise, according to Colliers. The immunization program, which requires vaccines to be chilled or frozen, will also provide a further boost to the segment.

In fact, several big logistics companies are ramping up investments in facilities to be used for storage of vaccines, among other things.

Fast Logistics Group is completing a cold storage facility in Cebu province in the Visayas Island this year. William Joseph B. Chiongbian II, the company’s CEO, told NNA the facility will be used for vaccines and other things.

Royal Cargo, Inc., another logistics firm, is looking for potential acquisitions to expand its pharmaceutical storage space, dry warehousing and container yard capacities, the company told NNA.

The Cold Chain Association of the Philippines is expecting the industry to grow at 8 to 10 percent over the next five years as demand for chilled and frozen commodities rises.

But with high vacancies still ailing other real estate sub-sectors such as offices and homes, the Philippine property market is poised for a slow recovery this year.

Business and consumer confidence have been shaken after the country descended into its worst post-war recession in 2020 amid severe lockdowns to battle a raging pandemic. The crisis was aggravated by a spate of natural disasters, such as Taal Volcano's eruption and devastating typhoons.

As such, Colliers believes the recovery of the property market may only begin next year.

Office vacancy rate, for example, may rise to 12.5 percent in 2021, its worst since 2003, said Colliers.

But demand from essential sectors like healthcare, e-commerce, logistics and warehousing may help to mitigate the situation, said Colliers.

However, Lobien Realty, believes the business process outsourcing (BPO) sector will continue to lead in taking up office space as foreign firms have continued to outsource certain functions to the Philippines.

Chinese online casinos, locally known as Philippine offshore gaming firms (POGOs), had to compete with BPO companies for office space previously. But now, they are taking a backseat with fewer inquiries, said Lobien Realty.

“Travel restrictions together with our countrywide lockdown last year had placed their business in a complete halt and have caused them to lose capital and a sizable amount of supposed business revenue,” the company explained to NNA.

Property consultants believe the pace of recovery of the real estate market will hinge on the rollout of the government’s vaccination program.

The government aims to vaccinate up to 70 percent of the population this year, starting from Monday (March 1).