Logistics huge opportunity for developers–SKF

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More than 130 attendees listen at The Future of Logistics forum. (SKF)

The logistics sector is the next big thing to watch in Philippine real estate as it offers a huge opportunity for developers, new technology and decentralization, according to the latest property report of Santos Knight Frank (SKF), the country’s leading real estate advisory firm and service provider.

A rising middle class, booming e-commerce market and the decentralization trend outside of Metro Manila are shaping the Philippines’ logistics industry and increasing the demand for warehouses and industrial properties, said Rick Santos, chairman and CEO of SKF citing the company’s latest report, “The Future of Logistics: A Real Estate Perspective.”

The report looks at the evolution of Manila’s industrial property sector, new warehouse models and initiatives by developers to capitalize on the growth of the logistics industry.

“The logistics sector is a catalyst of economic growth, delivering goods in a nation of more than 7,000 islands. Amid challenges in infrastructure and connectivity, the sector has seen strong demand for last-mile delivery hubs, inner-city distribution centers, cold storage and warehouse facilities, driven by strong domestic consumption from both e-commerce and traditional retail markets,” the report read.

Decentralization

The report reveals that despite the rise of land prices in Metro Manila, warehouse rents have remained essentially stagnant. With the present land values, construction costs and lease rates, the traditional warehousing business is increasingly becoming less attractive to investors who seek shorter payback periods.

In addition, available land for industrial real estate in the city has become more limited as traditional industrial areas such as the C5 Quezon City-Pasig City corridor continue to be transformed into mixed-use developments.

For industrial real estate projects, developers are now exploring provincial locations which offer larger tracts of developable land and also of reasonable land values. A number of property developers and companies have already entered this playing field, including notable players such as Ayala, SM, Metro Pacific, JG Summit and Filinvest.

“With the gentrification of urban areas in Manila and improving infrastructure in the region, areas such as North Luzon/Clark, Calabarzon, Cebu, Bacolod, Iloilo and Mindanao are new hotspots for real estate developments that cater to the logistics industry,”

New business model

Meanwhile, technology will also continue to shape the form of warehouses that will keep up with the dramatic change in the market.

“Investors and developers are increasingly looking at innovative ways to leverage the growth of the logistics industry, offering value-added services, solutions and technology to improve efficiency, speed and profitability,” said Kash Salvador, Associate Director for Investment & Capital Markets of SKF.

To improve profitability of warehouses in general, operators have offered add-on services and end-to-end solutions to occupiers, said Salvador.

Technological innovations, such as the Automated Storage and Retrieval Systems, have also made operations more efficient, he added.

Santos Knight Frank is the most trusted property consultant by industrial occupiers and investors in the Philippines, providing a wide range of real estate solutions such as advisory, transactional support, facilities management and appraisal, among other services, over the last 25 years

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