Logistics, REITs Seen to Drive Property Industry Recovery

According to top property management and consultancy services firm JLL Philippines, the country’s property industry is set to recover slowly from the current crisis, with the uptick happening in the next 18 to 24 months, as Manila Bulletin reported. The experts mentioned that new segments, especially logistics, will push the sector’s growth.

In a recent report released by the company, “The Evolution of Philippine Logistics: A Case for Better Quality Logistics,” JLL said that the logistics industry emerges resilient, given the strong performance of e-commerce and cold storage market. Set to grow by 160,000 square meters annually in the next decade, equipped with better quality amenities, the logistics industry is poised to contribute greatly to the real estate sector’s growth.

The report identified key factors that would allow the market to expand by 56 percent in the next five years and register a 125 percent increase in the next decade: “accelerated adaptation to e-commerce platforms, strengthening supply chain risk management, and expansion of last-mile fleet or the movement of goods from logistics facility/hub to final destination.”

Growing Demand for Better Facilities

Mentioning the market’s growing appetite brought about by technology innovations, the property management and consultancy services firm referred to the dramatic increase in transaction activity in recent years. However, they pointed out that the need for modern facilities is crucial in hitting the target figures.

E-commerce firms and third-party logistics have a strong demand for high-specification warehouses equipped with technology and digital tools. Efficiency, consolidation, decentralization, workforce, and sustainability are important pillars in addressing the growing interest for better quality logistics hubs, the company said.

Calling logistics spaces an “evolving asset class” in the country, JLL recognized the fact that top real estate developers are already taking the plunge and including this in their portfolios.

As of the first quarter of the year, logistics stock in the country was at 1.7 million square meters. Dry storage represents two-thirds of the supply. Cold storage makes up 21 percent, while cold and dry storage accounts for 12 percent. Another 424,000 square meters will be added to the supply by 2021.

Other Factors Prompting Recovery

Aside from emerging asset classes, JLL identified more segments that will fuel the real estate industry’s recovery. REITs, or real estate investment trusts, are among the named.

The country’s first-ever REIT recently completed its P12-billion initial public offering (IPO). The Ayala-sponsored asset, which goes by the trading symbol AREIT, consists of 47.86 million shares to be issued by the trust on a primary basis and 409.02 million secondary shares offered by the real estate giant. The trust is priced at P27 per share.

AREIT’s portfolio consists of three buildings: Solaris One, Ayala North Exchange, and McKinley Exchange. The properties have a total gross leasable area of 152,756 square meters.

Investors are optimistic about AREIT, considering the booming demand for office space, especially in the business process outsourcing (BPO) industry, high occupancy rate of the mentioned properties, and long-term lease contracts of building tenants.

With the success of the AREIT listing, the property sector expects more REIT offerings in the next few months. Double Dragon Properties Corporation, for one, will be introducing its own with an estimated value of P50.89 billion. Set to generate P16.97 billion, DDMP (DD Meridian Park) REIT will be filed with the Securities and Exchange Commission and the Philippine Stock Exchange this August.

Meanwhile, smart cities and townships, along with digitalization and technologies, were also among the factors JLL mentioned, which would contribute to the property industry’s recovery. Last June, the Department of Information and Communication Technology (DICT) named 25 municipalities as the next digital cities by 2025, as reported by the Philippine News Agency (PNA).

These are the cities chosen:

Balanga
Batangas
Cabanatuan
Dagupan
General Santos
Iligan
Iriga
Laguna Cluster (San Pablo, Calamba, and Los Baños),
Laoag
Legazpi
Malolos
Metro Cavite (Bacoor City, Imus, and General Trias)
Metro Rizal (Taytay, Cainta, Antipolo City)
Olongapo
Puerto Princesa
Roxas
San Fernando, La Union
San Fernando, Pampanga
San Jose Del Monte
Tacloban
Tagbilaran
Tarlac
Tuguegarao
Urdaneta
Zamboanga

The cities mentioned will soon see more investments and local jobs, particularly in the information technology and business process management (IT-BPM) industry. To make this possible, the municipalities will receive support from DICT, local government units, industry leaders, and academic institutions. Among the planned initiatives is the improvement of internet connectivity through partnerships with telecommunications companies.

Called “Digital Cities 2025: A Brighter Future Awaits in the Countryside,” the program promotes growth and development outside the capital region.

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Article and Photo originally posted by Lamudi last August 13, 2020.

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