Property boom transforming Philippine skylines

Positive outlook on the Philippine economy has seen a tremendous rise on vertical development. Major developers are keen on placing residential and office buildings not only in Manila, but also in key provinces. 

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MANILA, Philippines—As a Philippine property boom gathers pace, even Paris Hilton, Donald Trump and high-fashion house Versace are getting a piece of the action.

The good times are into their fourth year, fueled by steady economic growth, Western firms offshoring jobs to the Philippines, the buying power of millions of Filipinos working abroad and low interest rates.

In Manila, formerly sleepy pockets such as the Fort army base and the rundown Eastwood industrial zone have become chic, new business districts, catering mainly for the fast-growing outsourcing sector.

Across the country, more than 850,000 square meters (9.1 million square feet) of office space and 14,000 residential units will enter the market this year, property consultants CBRE Philippines said in a report.

It said many of the residential units catered for a growing middle class on the fringes of Manila and other urban centers.

The building boom has also spread to hotels, shopping malls and casinos, triggering hopes of a long-anticipated take-off of the underdeveloped tourism industry.

Three of the world’s biggest gaming industry leaders are building a $4-billion, 100-hectare (247-acre) Entertainment City complex of casinos on Manila Bay. The first of the casinos are set to open early next year.

The economy grew 6.4 percent in the first quarter, the stock market has surged 20 percent this year to hit all-time highs, and the country’s credit rating has been bumped up to just a step below investment grade.

The central bank’s benchmark interest rates are also at historic lows – 4.0 percent for the benchmark borrowing rate – ensuring large piles of cheap cash for property development.

Aside from the macro-economic picture, real estate analysts point to the outsourcing phenomenon as one of the key drivers of the property boom.

From virtually nothing a decade ago, outsourcing now employs more than 600,000 people and is worth $11 billion annually, according to the main industry association which is forecasting 15 percent growth in the years ahead.

Many of the skyscrapers are being built to cater for the outsourcing workforce, which performs a myriad of tasks from call center duties to designing architectural plans for foreign firms.

Meanwhile, roughly nine million Filipinos who work overseas are sending large chunks of the $22 billion they earn – equal to 10 percent of the nation’s gross domestic product – back home, often investing in real estate.

The frenetic building pace has some quarters anxious over a potential property bubble, with the global economic woes adding to concerns.

But Rick Santos, CBRE Philippines chief executive, remains bullish, in large part because of the expected continued growth in the outsourcing sector.

“As economies in the West tighten, global companies will see it in their interest to outsource their non-core functions to save on costs,” Santos told an industry briefing recently.

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