Prospects for the property market are rosy this year driven by emerging trends like the rise of data centers, repurposing of spaces and flight to quality, according to consultancy Santos Knight Frank (SKF).
SKF noted the government’s pronouncement to support the entry of hyperscalers and make the Philippines their hub has generated interest in data centers in the country, with five or six in the pipeline taking up as much as 20 hectares of space this year alone mostly in Laguna and Batangas, according to Kash Salvador director and head of Investment & Capital Markets of SKF.
Salvador also highlighted the prospects of the massive spaces of data centers folded into real estate investment trust (REIT) that would generate even more capital and attract investors.
Monica Gonzalez, manager for Occupier Solutions & Services Data Centers Lead of SKF, said demand for data centers is driven by the surge in digital consumption especially with electronic commerce and the Philippines’ heavy use of social media.
Gonzalez said the moratorium on new data centers in Singapore prompts operators to look for other markets in the region.
“The kind of demand we see now is for larger kinds of data centers for 10 up to 12 megawatts or even 70 (MW). The ones we have here currently in the Philippines are five, seven megawatts in size or less,” she said.
One of the latest entrants is YCO Cloud Centers which is constructing a 12 MW 10,000-square meter IT-capacity data center in Malvar, Batangas and set for operation in the second quarter of next year.
Salvador said the entry of “at least five to six groups looking to expand in the Philippines depends on how fast they can move in terms of their acquisitions.”
“For REITs, you just need to establish the lease contracts, whether it’s one tenant or multiple tenants in that particular space. It will be valued based on the leases, the revenues that it can generate,
or if it’s big enough, you can have multiple warehouses in different locations, different data centers. You can actually diversify with storage, logistics and warehousing into data centers. That, I would say would be very attractive to investors,” Salvador added.
Gonzalez admitted power supply would still be challenging even as the country has a good network of power substations and renewable energy supply. “But it is still something that has to come up to speed.”
But she said government has committed to assist on the matter to accommodate hyperscalers.
The country’s data center capacity is now 95 MW and could go up to 125 MW by 2023, making it ahead of Vietnam and Thailand.
SKF said commercial real estate market will see an uptick in activity as the economy reopens while resilient sectors such as industrial and logistics will continue to thrive.
SKF also expects that the rebound of outsourcing in the Philippines and implementation of return-to-office programs will benefit the office market despite right-sizing activities by a number of occupiers.
SKF believes demand for residential properties especially in the condominium rental market in Metro Manila business districts will pick up — a result of re-opening borders, higher vaccination rate, and return-to-office programs.
