Development of energy, data center infrastructure to boost real estate sector

THE DEVELOPMENT of renewable energy and data center infrastructure in the country is expected to drive the real estate sector’s growth next year, according to real estate services firm Santos Knight Frank.

“Globally, the need for data centers is massive. In the Philippines, we have a number of data center groups and a number of telcos have been aggressive in that space. Renewables, there are also a number of big players in there. A lot of that would contribute to this growth,” Rick Santos, chairman and chief executive officer of Santos Knight Frank, said in a briefing last week.

The construction of new infrastructure in the pipeline is also expected to support the appreciation of residential prices, Mr. Santos said.

The strong push for infrastructure development in these sectors, such as data hyperscalers and new renewable energy facilities, will help improve the real estate segment by increasing demand for warehousing, cold storage and distribution, he added.

The Philippines is seen as an attractive location for hyperscalers due to the country’s strategic position in the Southeast Asian region, he said.

The Department of Information and Communications Technology expects data centers’ capacities to increase by five times to 300 megawatts (MW) by 2025.

For renewable energy, the government is targeting to grow its capacity, with about 50,366.96 MW worth of renewables listed as indicative projects for years 2024 and 2026.

The real estate sector is expected to end this year strong amid contributions from the commercial and residential segments, Mr. Santos said.

“The office market has continued its road to recovery post-COVID. The increased demand from conventional office tenants and flexible office operators has significantly contributed to the upswing in commercial leasing requirements. We are expecting this momentum to continue in 2024,” he said.

Santos Knight Frank data showed Manila’s current office occupancy rate is at 80%, improving in three straight quarters from the all-time low of 75% in the fourth quarter of 2022. Bonifacio Global City and Makati continue to post the highest occupancy rates at 89% and 80%, respectively.

“The increased demand from conventional office tenants and flexible office operators has significantly contributed to the upswing in commercial leasing requirements. We are expecting this momentum to continue in 2024,” Mr. Santos said.

Santos Knight Frank noted occupiers in the Philippines still prefer quality buildings that provide good value.

In the third quarter, prime buildings’ vacancy rate stood at 17%, lower than the 20% average office buildings’ vacancy.

This, despite prime monthly lease rates (P1,244 per square meter or sq.m.) being higher than the market’s P980 per sq.m., the data showed.

Makati City had the highest rate with weighted average lease rate of P1,143 per sq.m. a month, followed by Fort Bonifacio (P1,098 per sq.m.) and Bay Area at (P902 per sq.m.), based on the data. — AEOJ