Real Estate Market in The Philippines Will Grow to Extreme High This 2020

  • Office real estate will need 10% more growth this year.
  • Retail real estate, has the second-largest need in more real estate space with 1 million sqm of additional allotment up to 2022.
  • The tourism and residential real estate also need further development with 3500 more rooms and 15,500 condominium units expected for turn over this year.

The Philippines is seeing more buildings being constructed and while it looks crowded, it’s actually an indication that the economy is becoming better. In fact, the Philippine economy was recently recorded with a GDP amounting to USD350B and continues to grow at a healthy rate of 6.0%.

In 2019, we’ve seen numerous construction projects turned over for occupancy and most of these buildings are intended to house employments, most especially in the BPO and POGO industries. And experts in leasing out buildings from the Lobien Realty Group affirms that this will continue to be the trend this 2020.

LRG confirmed that it made a thorough analysis of the different real estate markets across the Philippines and concludes that the lease of real estate spaces will remain strong this year. This follows the demographics gathered on the current occupants of commercial buildings, pointing at BPOs and POGOs as the biggest clients of the industry.

The millennial group takes a huge percentage of the workforce of the Philippines. Statistics state that at present, there are 107 million highly literate and industrious Filipinos and most are 25 years old. Further, 61.4% of our population comprises the labor force and 95% of this is the group of the millennials who are young, energetic, and tech-savvy. In some international articles, the millennials who enter jobs that follow archaic procedures tend to feel bored easily. This is why they shift to another job where they can explore the latest technologies and in the Philippines, the POGOs and BPO are some of the industries that can satisfy this urge.

The Growth of Office Property Market

Following this growth in the POGO and BPO sectors, the need for more office spaces is also growing. It was recorded that POGO companies occupy 36% while BPOs occupy 30% of the total office take-up in Metro Manila alone last 2019. But LRG expects that there will be a growing demand for more office space this 2020.

The projection follows the expectation for the Philippine Philippines’ IT-BPM industry to grow by 6% – 7% in the number of headcount from 2019 – 2022. This growth is accredited to the sustained and improved up-skill programs by the private sects and combined with the government support through PEZA. Consequently, the popularity of flexible/serviced offices is expected to reach 10% growth every year up to 2022.

The same growth is expected to happen outside the NCR where Cebu and Davao are also projected to continue to prosper their economic activities. The Build Build Build program will spearhead the real estate developments to cater to this growth outside Metro Manila. As economic development increases throughout the country so do the need for office space.

To emphasize the boom in real estate this year, 71% of the total office space supply of 1,034,825 sqm in Metro Manila was leased at an average cost of PHP 1160/sqm. Only 4.05% of unoccupied office space was recorded in Metro Manila’s central business districts.

More E-Commerce and Physical Malls to Be Built This Year

The boom of the Philippine economy will also lead to the construction of more shopping malls. LRG notes that the real estate market for the retail industry will increase for more than 1 million sqm of GFA for shopping malls across the country from 2020 – 2022. This rapid growth follows the fusion of E-Commerce and physical malls.

Tourism Real Estate Will Also Continue to Grow

The country is recording more and more foreign entries every year. Just last year, a whopping 6.1 million foreign tourists were noted to have arrived in the country as recorded in September. This accounts to a 14% increase from the same period in 2018. While we have a bounty of accommodations in the country from the combination of transient properties, hotels, motels, and other types, there still seems to be a lack of spaces to sleep everyone coming to the county. And to cope with this demand, 3500 rooms will be added to the current supply until 2021.

Residential Real Estate to Expand

As we mentioned, more young adults are becoming more financially independent from their families. This leads them to want to maintain a home of their own. In Metro Manila alone, there was a total of 376,000 condominiums completed as of 4Q 2019. This year, an additional 15,500 units are expected to be finished.

The majority of these condo units are geared towards the mid-end market and come with a price range between PHP 6M – 9M. These prices are expected to increase by 5-6% yearly from 2020 -2022.
With more foreigners finding opportunities for businesses in the country, LRG expects higher demand from foreign nationals will continuously sustain the take-up of residential units. Demands from locals are also expected to grow at the same rate.

Final Words

As the country continues to become a more developed country, LRG is foreseeing a more positive Real Estate Market this 2020 than the previous years. The improvement in the economy has led to more and bigger infrastructures taking shape.

LRG notes the Philippines to be among the hottest real estate investment spots in Southeast Asia today. The firm continues to research, analyze the studies, and make conclusions to help anyone looking to invest in Philippine real estate make a more informed decision.

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Introvert, wanderer, blogger, foodie, a hip-hop music writer, and one of the co-founders of a tech start-up company called GigsManila.