PROPERTY-research firm Colliers International Philippines (Colliers) said the successful implementation of Real Estate Investment Trust (Reit) will help boost Cebu’s property sector.
The launch also places the Philippines at par with other Asian economies that have fully developed capital and real estate markets.
Colliers said Reit implementation in the Philippines will result in the further differentiation and innovation of property development projects in the Philippines which should eventually benefit Filipino investors and end-users. Its successful launch is also seen to take advantage of the government’s ambitious infrastructure development plans and benefit key cities outside Metro Manila such as Metro Cebu.
“In our opinion, the implementation of Reit is likely to result in a more pronounced construction of townships or integrated communities in Metro Cebu,” the firm said.
Reit defined
Reit Asia Pacific defines a Reit as a publicly listed corporation that allows investors to buy shares in recurring income producing real estate assets such as office buildings, hospitals, warehouses, hotels, and shopping malls.
In most cases, Reits operate by leasing space and passing on collected rent payments to their investors in the form of dividends. In many jurisdictions in the Asia Pacific region, as mandated by law Reits distribute at least 90 percent of their earnings in the form of dividends.
Colliers said office and retail will remain as major sources of recurring income for developers in Cebu and are considered viable assets to be divested into Reit.
Colliers recommends that developers should be strategic with their office projects.
“We encourage them to provide flexible office cuts to English language centers and explore parcels of developable land around the proposed infrastructure projects which form part of the government’s ‘Build, Build, Build’ push,” Colliers said.
Outsourcing and offshore gaming companies continue to account for the bulk of office space demand in Cebu.
Colliers said occupants should lock in available space in the Cebu IT and Cebu Business Parks and their outskirts and consider new space in Mandaue, especially for non-outsourcing firms.
Retail, construction boom
Reit’s implementation will also benefit mall developments.
Malls to be developed by major developers within their own townships should account for 90 percent of new retail space from 2019 to 2021, it said.
With a vibrant retail landscape, Colliers also encouraged developers to: explore retail demand of developments in townships; build more space in Mandaue; differentiate retail offerings; and explore partnerships between national and homegrown firms.
Moreover, the successful launch of Reits in the Philippines bodes well for the property market and the Philippine economy in general, as it is likely to attract more foreign investments into the country.
Reits should also stoke the construction sector which has significant multiplier effects to the economy.
Colliers also noted that developers should use Reit proceeds to develop integrated communities in key cities outside Manila.
Colliers said Cebu is among the more attractive locations outside Manila and that this should support national developers’ goal of expanding their market-wide footprints outside of the country’s capital.
Reit listing
Colliers encourages property players including those based in Cebu to consider priming assets for Reit listing.
This is particularly important for mid-tier developers that intend to raise funds by selling assets to major developers in the future.
“In our opinion, smaller players should consider refurbishing their offices and malls outside Manila,” Colliers said. (PR)