Investors’ shifting needs drive upgrades in industrial real estate

Industrial property developers are expanding their land holdings and upgrading facilities to meet the evolving requirements of local and foreign investors, according to industry executives.

“We recognize the importance of staying competitive in terms of infrastructure and capacity, hence we continuously invest in modernizing our facilities, expanding our footprint, and applying efficient, space-maximizing design principles to optimize land use,” Damosa Land, Inc. (DLI) President Ricardo F. Lagdameo said.

“We provide a range of options — from ready-built facilities (RBFs) and warehouses that enable companies to quickly begin operations, to industrial lots for lease or sale for those who wish to construct purpose-built facilities,” Mr. Lagdameo also said.

“This dual offering allows investors to jumpstart their activities in RBFs while their custom facilities are being built, significantly reducing time-to-market.”

The company is also exploring opportunities for horizontal and vertical developments to address the changing needs of its locators, he added.

DLI operates Anflo Industrial Estate (AIE), a 63-hectare special economic zone in Panabo City, Davao del Norte, which hosts 24 locators from six countries.

The Philippines risks missing out on opportunities to attract industrial investments due to limited and aging inventory, according to real estate services and investment firm CBRE.

Industrial property developers said global investors are now seeking strategic hubs that support long-term growth.

“Today, it’s no longer enough to simply offer land or build traditional industrial estates. What global investors need is certainty, scalability, and speed to market,” said Aboitiz InfraCapital, Inc. (AIC), the infrastructure arm of the Aboitiz group.

To meet growing demand, AIC said it has been expanding its industrial landbank annually.

“We continuously open new inventory year after year to meet growing demand, backed by a total landbank of nearly 2,000 hectares of industrial land. This gives locators the ability to scale confidently over time, knowing the space and support will be there as they grow,” it said.

AIC currently offers over 60 hectares of available industrial inventory across its four economic estates: LIMA Estate in Batangas, TARI Estate in Tarlac, and the West Cebu Estate and Mactan Economic Zone 2 Estate in Cebu.

Lot sizes range from two to four hectares and are expandable depending on locator requirements, AIC said.

Tarlac-based Victoria Industrial Park (VIP) has focused on providing fully developed industrial lots with modern infrastructure rather than pre-built warehouses, according to Chief Executive Officer Melissa Yeung-Yap.

“This design philosophy empowers companies to build facilities precisely tailored to their specific operational requirements and international standards from the ground up,” she said.

The masterplan for the 30-hectare VIP, which opened in May, also prioritizes efficient internal flow, disaster resilience, and future expansions, Ms. Yeung-Yap said.

“This proactive approach ensures that businesses can scale operations seamlessly as they grow, and their facilities remain relevant and efficient for decades to come, mitigating the challenges posed by limited space and outdated infrastructure,” she added.

Sustainability has also become a key consideration among global locators, developers said.

“Our flexible space solutions — including RBFs, warehouses, and industrial lots for lease or sale — allow companies to start operations quickly, reducing construction waste and promoting efficient land use,” Mr. Lagdameo said.

AIE has adopted modular and space-efficient designs, as well as sustainable features such as LED lighting, rainwater harvesting systems, and solar-ready infrastructure.

All of AIC’s operating estates have received a 5-Star BERDE (Building for Ecologically Responsive Design Excellence) Certification, the highest rating from the Philippine Green Building Council.

To support sustainability goals, AIC estates also offer renewable energy integration, real-time energy and water monitoring systems, efficient waste management, and green mobility infrastructure, the company said.

“Our investments in smart utilities and resilient infrastructure are designed not only for today’s requirements but to meet the demands of future industries,” it added.

CBRE projects around 79,669 square meters of additional industrial space this year, with most of the upcoming supply located in Laguna, Cavite, and Batangas.

Source: Business World

Philippine banks’ real estate exposure sinks to 6-year low

The exposure of Philippine banks and trust entities to the property sector dropped to a six-year low at the end of March, data from the Bangko Sentral ng Pilipinas (BSP) reported.

Banks’ real estate exposure ratio slipped to 19.41% as of end-March from 19.75% at end-December. It was also lower than 20.31% in the same period last year.

This was also the lowest real estate exposure ratio recorded in six years or since the 19.2% at end-March 2019.

The BSP monitors lenders’ exposure to the real estate industry as part of its mandate to maintain financial stability.

Investments and loans extended by Philippine banks and trust departments to the real estate sector rose by 7.76% to P3.34 trillion as of March from P3.1 trillion in the same period in 2024.

Broken down, real estate loans increased by 9.1% to P2.97 trillion as of end-March from P2.72 trillion at end-March 2024.

Residential real estate loans increased by an annual 11% to P1.13 trillion, while commercial real estate loans also went up by an annual 7.96% to P1.83 trillion.

Past due real estate loans stood at P149.52 billion, higher by 9.3% from P136.79 billion a year prior.

Broken down, past due residential real estate loans climbed by 14.74% to P107.62 billion, while past due commercial real estate loans fell by 2.56% to P41.9 billion.

Gross nonperforming real estate loans inched up by 0.44% to P111.27 billion at end-March from P110.79 billion a year ago.

This brought the gross nonperforming real estate loan ratio to 3.75% at end-March, lower than 4.07% a year earlier.

Meanwhile, real estate investments also dipped by 1.86% to P372.4 billion as of end-March from P379.45 billion in the same period a year ago.

Debt securities increased by 1.93% year on year to P256.04 billion, while equity securities fell by 9.28% to P116.36 billion.

Joey Roi H. Bondoc, director and head of research at Colliers Philippines attributed the banks’ lower exposure ratio in the first quarter to the drop in consumer demand for housing loans.

In a phone interview, Mr. Bondoc said there have been reports that homebuyers are backing out of their loans.

“Once it enters the bank financing, [the payment] balloons to, say, quadruple, quintuple times. That’s the problem,” he said, noting that some buyers may have been attracted by the low downpayment.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said real estate developers may also be cautious in managing new supply after the exit of Philippine offshore gaming operators.

“Banks, real estate companies, investors, end-users also cautious on possible slower world and local economic conditions due to Trump’s higher tariffs/trade wars/other protectionist policies and geopolitical risks recently such as the Israel-Iran war,” Mr. Ricafort said.

Mr. Bondoc said he sees some “green shoots of recovery, but those are primarily outside of Metro Manila.”

“The horizontal house and lot projects are still good. But, again, the more expensive projects, say those in Metro Manila, including the condos, the take-up is definitely down,” he said.

Recent rate cuts by the BSP may not have been felt by consumers.

“We’ve seen these reductions already from the central bank since last year. But have we seen an impact, a positive impact, meaning reduced mortgage rates? Not yet. We have not seen that,” Mr. Bondoc said.

On Thursday, the BSP delivered a second straight 25-basis-point (bp) cut, bringing its policy rate to 5.25% amid a benign inflation outlook and slowing economic growth.

It has now reduced benchmark borrowing costs by 125 bps since it began its easing cycle in August last year.

“Our average rate, for example, five-year loans, still at 7.7%. When last year, it was 7.8%. There’s really no sizable, substantial correction or reduction in terms of these mortgage rates,” Mr. Bondoc said.

BSP Governor Eli M. Remolona, Jr. also signaled they could deliver one more 25-bp cut this year.

Source: Business World

Real estate risks need closer scrutiny

Even as the Philippine banking system has remained resilient, the International Monetary Fund (IMF) said risks in the real estate sector and consumer credit still require closer monitoring and could prompt the central bank to intervene.

“Financial stability risks remain contained. The banking system has sufficient liquidity and capital buffers, and nonperforming loans (NPL) are low,” an IMF spokesperson said.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed the banking industry’s NPL ratio eased to a three-month low of 3.3% in March.

“However, parts of the commercial real estate sector have seen persistently high vacancies and falling rents, and NPLs for housing loans remain elevated,” the IMF said.

Property consultant Colliers Philippines expects the vacancy rate for residential property in Metro Manila to hit 26% by yearend, while office vacancies are projected at 22% this year amid condominium oversupply and slow take-up of unsold units.

The BSP in its latest Financial Stability Report noted the “rising NPLs in the real estate sector.”

The NPL ratio for residential real estate was at 6.82%, while commercial real estate NPLs were 2.18% as of September 2024. The bulk (62.5%) of the real estate loan portfolio consists mostly of commercial loans.

The BSP also earlier said the mid- and low-cost housing segments, which account for a large part of residential real estate loans, have driven the rise in NPLs.

Consumer loans are also another area that the BSP needs to keep an eye on, the IMF said.

“The rapid growth in consumer credit, though a relatively small portion of banking assets, warrants close monitoring,” it said.

BSP data showed outstanding loans of universal and commercial banks rose by 11.8% to P13.19 trillion in March from a year ago.

Consumer loans to residents increased by 23.6% in March to P1.64 trillion, mainly due to the 28.8% jump in credit card loans to P959.43 billion.

The central bank must also be prepared to step in, when necessary, the multilateral institution said.

“The BSP should be ready to adjust macroprudential policy in line with developments in the financial cycle to preempt the buildup of vulnerabilities,” the IMF said.

In the same Financial Stability Report, the BSP said that the financial system’s real estate loan exposure will require “closer monitoring amid evolving market conditions.”

Banks’ real estate exposure ratio rose to 19.75% as of end-December from 19.55% at end-September.

This as total investments and loans extended by Philippine banks and trust departments to the real estate sector grew by 5% to P3.31 trillion as of end-December from P3.15 trillion in 2023.

The BSP monitors lenders’ exposure to the real estate industry as part of its mandate to maintain financial stability.

Source: Business World