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Disruptions in the local property sector

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By Bjorn Biel M. BeltranSpecial Features Writer

One of the most talked-about phenomena happening in the world of business right now is disruption. Times are changing faster than many industries can keep up with, and the arrival of the future is creating an upheaval among those still stuck in the past. This is true in real estate as it is in any other, and more so in the Philippines, a country currently in the middle of an economic transformation.

In a newer, faster world of business, the next generation of workers is adapting to a new, more holistic lifestyle. In the Philippines, there has been a record number of individuals buying condominium units, with about 52,600 units sold in Metro Manila during the final quarter of 2017, according to the residential property market report of real estate consultancy firm Colliers International Philippines.

This is significantly higher than 2016’s 42,000 units sold, and the highest number of units sold in the history of Metro Manila.

Real estate consultancy firm Pronove Tai suggested that the record high in condominium take ups in 2017 was attributed to factors such as the country’s robust economy, record high OFW remittances and dollar exchange, and the low-interest environment.

“Furthermore, the demand was driven by the surging interest from young urban professionals as well as foreign nationals to reside in condominium buildings near their workplace,” Pronove Tai CEO Monique Cornelio-Pronove said in an interview with BusinessWorld.

These young professionals, she said, “dominate the working force in office districts and spend more than any other demographic age due to lifestyle orientation, particularly employees under the IT-BPM (Information Technology and Business Process Management) industry.”

The flexibility offered by vertical living spaces has also become more appealing due to the country’s worsening traffic congestion. Workers are choosing to live closer to their workplaces rather than spend three to four hours on their daily commute.

“In addition, these young professionals want to avoid the inconvenience of Metro Manila traffic which reduces productivity and practicality as commuters spend an average 3-4 hours per day on traffic,” Ms. Cornelio-Pronove said, citing a report by the Japan International Cooperation Agency.

“For efficiency and convenience, these young professionals prefer to invest in condominium buildings for comfort and lifestyle,” she added.

Conversely, flexible workspaces are becoming common in the office property market. Colliers International, in its The Flexible Workspace Outlook 2018 report, said that flexible workspaces are no longer seen as a disruptor nor a complementary sub-sector in the office market, but rather “a fundamental part of commercial real estate and a sector in its own right”.

Colliers International noted the continued growth in flexible workspace demand across key submarkets in Asia-Pacific including the Philippines.

“The growth of flexible workspace demand in the country has been attributed to the thirst for flexibility from multinational corporations (MNCs) as well as increasing demand from small businesses,” the report said.

“Over 200,000 square meter (2.15 million square feet) is occupied by flexible office space operators in Metro Manila alone, with many still looking to expand this year. The profile of tenants using these spaces varies from start-ups, to law firms, MNCs and freelancers.”

Maricris Sarino-Joson, Colliers International Philippines’ Associate Director for Office Services, said that flexible workspaces in the Philippines is forecasted to grow along with the attention that the country is garnering from foreign investors.

“We expect international flexible workspace operators to penetrate the Philippine market in 2018, though given the nuances of the domestic market, this will likely be in partnership with local developers or investors, and in some cases via acquisitions,” Ms. Sarino-Joson said.

“Given the range of end-users in flexible workspace, we expect a wide geographical spread, and operators will likely set up several smaller sites rather than fewer large scale sites due to challenges in transport infrastructure. For this reason, we may see space within retail malls repositioned as flexible workspace,” she added.

Colliers predicted that as small and medium businesses in the Philippines expand, the demand for flexible workspaces would follow all across the country. Aside from Metro Manila, Colliers also sees potential in Cebu, Bacolod, Iloilo, and Davao in terms of flexible workspace demand.