The current bearish real estate industry in the Philippines is expected to bounce back in the second half this year to early 2022 fueled by the government’s huge infrastructure program and the private sector driven REITs regime.
This was the gist by the Asia Pacific Real Assets Association (APREA), which is composed of chapter members from countries in the region, during a virtual media conference from Singapore as players in the Asia Pacific are positioning themselves for the real assets boom in the region post pandemic with expected explosion of capital coming from government infrastructure program and the private sector led REITs.
For the Philippines, APREA CEO Sigrid Zialcita stressed that the current situation is still bearish because of the lockdown due to the COVID-19 cases. “But we do see a temporary phenomenon… do see the country bouncing back in the second half this year to early 2022,” she said.
In terms of REITS, Zialcita said, that the BPO in the country will be a most critical pillar in the country’s estate and real assets. With a strong BPO sector accounting for 7-8 percent of GDP, this will serve as catalyst for real estate growth.
She also noted that REITs companies in the Philippines, the tenancy is also largely consisting of operators from the BPO sector.
“The first REIT is just the beginning and we see a few companies have applied for REITs and we are expecting more in the next 6-12 months,” she said.
REITs, or real estate investment trusts, are companies that own or finance income-generating real estate across a range of property sectors. Most REITs trade on major stock exchanges.
Dato Stewart Labrooy, chairman Southeast Asia Market chapter of APREA and executive chairman of AREA Management Sdn Bhd, noted that not too many realized of the many big real estate firms in the Philippines and the very good assets coming to the market not just locally but globally, as well.
In the new reality, he said, REITs or securitization is a very important option for Philippine real estate firms.
For Asia Pacific, APREA Chairman John Lim the region will be the center of growth because it is primed to take advantage of the revolution in real assets.
Despite the pandemic, APREA described the growth in real assets as an “Asian Century” and Asia will remain a focus of future global growth, and is expected to boast the largest economies in the world including China, Japan, India and the ASEAN region in 2030 and beyond.
Driven by demographic tailwinds, urbanization in the Asia Pacific is an epic boom that will drive the growth of its middle-class and with it, a cycle of rising consumption. Real assets are a play into the region’s structural megatrends that will outlive the pandemic.
“The benefits of investing in institutionalized assets will be more evident as the world inches towards a post-pandemic future. Allocations to the region from global investors can only continue to rise and the securitization of the very assets so critical in driving its growth will be a massive investment opportunity.
APREA’s goal is to pave the way for the advancement of investment opportunities into the region’s real assets,” said Lim.
The Southeast Asia region alone is home to nearly 600 million population with GDP of close to $2.7 trillion dollars.
Southeast Asia’s ambitious infrastructure projects are happening across the region. President Duterte’s “Build! Build! Build!” infrastructure plan in the Philippines is underway with 75 different projects expected to cost $180 billion. In Indonesia, a high-speed rail system connecting the 140-km trip between Jakarta and Bandung is also being built.
“As it stands, Southeast Asia’s $2.4 trillion economy is the seventh-largest in the world and is forecasted to jump to fourth largest in Asia Pacific by 2050. Its workforce will grow by a further 60 million while its urban population is expected to rise by an additional 90 million by 2030. The reality is that ASEAN needs infrastructure development if it wants to sustain its economic growth,” said Zialcita.
The economic ambitions of the region will provide the necessary impetus to power infrastructure spending and lift it out of the coronavirus slump.
Officials cited China, which has announced plans to focus on developing “new infrastructure” to reach development targets. Key infrastructure investment plans announced for the next 5-7 years will require close to $7 trillion. Bets are also placed on India’s infrastructure sector. The Indian government, in its latest budget, has pledged to expand expenditure into its $1.5 trillion infrastructure pipeline, creating financing institutions that can open the role of capital markets in infrastructure financing.
Plans to integrate the region’s economies will also fuel another infrastructure boom. While China’s Belt Road Initiative has undoubtedly headlined the effort to connect Asia, they are by no means alone. Japan articulated its own Partnership for Quality Infrastructure to expand funding in the region’s infrastructure development. Infrastructure diplomacy programs have also seen US and Australia collaborate on infrastructure projects in the region. Similarly, the European Union has its own “Connecting Europe and Asia” strategy. All this points to an internationalization of capital in the Asia Pacific.
In her presentation, she showed of potential $8 trillion infrastructure boom in the Asia Pacific region. Aside from infrastructure, APREA said that government policies in the region will continue to be conducive with significant efforts made by fast-growing countries to develop their own REIT regimes.