Philippine and Chinese investors bet on Manila’s warehousing sector amid a boom in household consumption

Logistics and warehousing in the Philippines is poised for some rapid growth as local and overseas investors take advantage of booming household consumption. Manila’s improved relations with Beijing are also boosting investment in the sector from Chinese companies, including Alibaba Group Holding, the world’s largest online trading platform. In October 2018, Lazada Group, an Alibaba affiliate, opened a 54,000 square metre warehouse in Laguna – its largest fulfilment centre in Southeast Asia with a total storage capacity of 5 million items. Alibaba owns the South China Morning Post. Property consultancies Santos Knight Frank and Colliers International said that Manila’s aggressive infrastructure programme and China’s Belt and Road Initiative, although it does not cover the Philippines, are also partially boosting interest in the logistics segment. Santos Knight Frank estimates for investments in warehouses to be worthwhile, the price of land has to fall by around 70 per cent. Industrial land values in various districts of Metro Manila range from 10,000 Philippine pesos (US$192) to 250,000 Philippine pesos per square metre, but rents remained stagnant at between 160 pesos and 650 pesos per square metre per month as of April. Metro Manila comprises 16 cities and covers an area of 619.6 square kilometres. But this has not deterred local and foreign investors from betting on the logistics sector. In 2018, investment in the transport and storage industry grew 626 per cent to 129.6 billion pesos from 17.8 billion pesos from a year earlier, according to data from the Philippines’ Board of Investments. Household consumption, which drives the growth of the logistics sector, grew 6.3 per cent in the first quarter, higher than the overall economic growth of 5.6 per cent in the same period. Consumer spending accounts for 60 per cent of the Philippine economy, and with the softening of inflation, analysts believe it would sustain household spending and in turn boost the logistics sector. “The scarcity of land in Metro Manila, the drive towards decentralisation and the huge demand in the e-commerce and traditional retail sectors offer huge opportunities for players in the logistics and real estate sector,” said Kash Salvador, associate director, investment and capital markets at Santos Knight Frank. Several of the Philippines largest companies have invested in the segment. For example, Ayala Land, a unit of the country’s oldest conglomerate, acquired another listed property company whose portfolio included logistics and industrial real estate, while Metro Pacific Investments bought a 20-hectare property in Cavite province to boost its warehouse business. According to the Philippine Economic Zone Authority (PEZA), Chinese, Dutch, Japanese and Taiwanese investors have committed to either put up or expand existing logistics facilities in southern Luzon, the country’s largest and most populous island. “In fact, the warmer relations between the Chinese and Philippine governments have been benefiting the Philippine economy with growth trickling down to property segments including logistics,” said Joey Bondoc, research manager for Philippines at Colliers. He added that more logistics investments from Hong Kong and mainland China are likely to flow into the country once industrial estates financed by investors from the Philippines and China are completed. At the Boao Forum for Asia last year, Philippine President Rodrigo Duterte witnessed the signing of US$9.5 billion worth of investment deals with Chinese businessmen, including the construction of China-Philippines International Techno-Industrial Zone in Subic Bay. “More Chinese manufacturing investments in the country should also drive demand from third-party logistics providers from Hong Kong and mainland China. We’ve received a number of queries from these firms and the Philippines is definitely on their investment radar,” Bondoc said. Meanwhile, Alex Reyes, vice-president for cargo at Cebu Pacific Air, said that increasing trade volumes as well as the rise of e-commerce will fuel the need for more robust cargo and logistics services. “Cargo has been a bright spot over the past years – growing steadily at double-digit levels,” Reyes said.

Philippine and Chinese investors bet on Manila’s warehousing sector amid a boom in household consumption

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}But property consultancies say that prices of industrial land in Metro Manila must fall by 70 per cent to make investments worthwhile

But property consultancies say that prices of industrial land in Metro Manila must fall by 70 per cent to make investments worthwhile