Aug 102013

MANILA, Philippines – Despite interest from foreign firms to invest in manufacturing facilities in the Philippines amid the country’s impressive economic performance, supply of industrial spaces is expected to remain abundant given the high power and labor costs here, property services firm CBRE Philippines said.

“While renewed interest in the country’s industrial sector is evident, investments in these types of projects may take some time before it materializes, with supply of industrial properties to remain abundant in the short to medium term,” CBRE Philippines said in its Metro Manila MarketView report for the second quarter.

Supply of industrial spaces is seen to remain healthy over the short to medium term as it noted that foreign firms are concerned over the country’s power and labor costs.

“The manufacturing sector continues to be challenged by relatively high labor and power costs compared to its neighboring nations,” the CBRE report said.

But while high power costs are preventing foreign firms from making investments here at the moment, the development of new power generating plants is expected to benefit companies that will locate in the country in the future.

It noted that investments in the power sector have increased with foreign and local firms vying to set up power plants throughout the country.

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“The development of new power generating plants is anticipated to produce enough energy to address the demands of the general population and the ongoing industrialization of the economy. It is also expected to lower the cost of energy prices through competition among power suppliers,” the firm said.

Industrial firms like Yokohama Tire Philippines, Inc. and Shimano, Inc. which have correspondingly expanded and entered the Philippine market during the second quarter, it added, are seen to benefit from the resulting lower power costs.

The Department of Trade and Industry reported earlier this month approved foreign investments by the Board of Investments and Philippine Economic Zone Authority jumped 139 percent to P91.91 billion in the first semester from the comparable P38.49 billion in the same period last year, indicating strong investor confidence given the country’s positive economic performance and improved business environment.

Even as there is increasing interest from foreign companies to invest in the country, the government wants to encourage more firms to come here by conducting road shows and addressing issues affecting the business sector such as corruption and lack of infrastructure.

The government is likewise moving to revive the manufacturing sector through its roadmap initiative which involves crafting of roadmaps by different industry associations containing strategies and measures for them to be more competitive and to grow.

Apart from plans for specific industries, the government is also coming up with an integrated roadmap for the entire manufacturing sector.

The government wants to transform the manufacturing sector to create jobs and achieve inclusive growth.

CBRE Philippines said in the same report that as investor confidence in the country has solidified, it expects strong demand for residential properties here to pick up in the coming quarters.

“Expatriates, foreign investors and high net worth individuals will drive the demand for luxury residential properties while OFWs (overseas Filipino workers) and middle income individuals will buoy the middle and affordable segment,” it said.

With strong demand seen, developers are expected to continue constructing residential properties.

As for the office market, CBRE Philippines said it also expects demand to remain strong.

“Outlook for the office market remains optimistic for the rest of the year. Supporting tailwinds from an increasing office space demand from multinational and BPO (business process outsourcing) companies shall sustain the office market,” it said.

The firm also noted that the country’s economic growth signifies encouraging possibilities for the office market as BPO opportunities are seen to diversify into other skilled and knowledge-based fields such as finance, accounting, software development, information technology and other high-value services.

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