In The News

Proposed land conversion ban is bad for industrial property market

Media Coverage

By: Catherine Talavera, November 2, 2016, The Manila Times

A PROPOSED two-year ban on conver having a negative effect on the industrial property sector, a real estate analyst said.

“I guess the dark cloud on the horizon would be the agricultural land conversion moratorium, because one of the biggest converters of agricultural land would be industrial,” Colliers International director for advisory services Julius Guevara told reporters in a recent interview.

The possible demand from Chinese and Japanese manufacturing firms is driving the optimism in the sector, but the proposed ban is now having a negative impact on the industrial property market.

“In fact, some of the developers—the ones who have announced new industrial parks in Batangas—are expressing their problem now because they haven’t yet converted some of their land,” Guevara noted.

On September 12, President Rodrigo Duterte approved the Department of Agrarian Reform’s (DAR) proposed two-year ban on converting agricultural land to non-agricultural uses in support of the food security program.
Take the proposed ban out of the equation and the you would have a brighter outlook for the industrial property market, Guevara noted. “For the most part, bullish would still be the sentiment.” Guevara said.

The demand for industrial space continues to come from Chinese and Japanese companies that are planning to put up manufacturing facilities in the country.

The Japanese are eyeing properties in the south of Metro Manila, while the Chinese and Koreans are looking at properties on the nearby provinces north of the capital, Guevara noted.

The industrial stock in the Cavite-Laguna-Batangas area was 6,898 hectares as of the second quarter of 2016.
Guevara noted some of the Chinese investors President Duterte was able to attract are industrial players in search of alternatives in view of the rising cost of labor in China. “The only concern is that these types of companies are the low-value type of industrial manufacturers,” he said.

“So they’re looking for alternative areas as well. So it’s not just the Japanese. They themselves are impacted by the increasing wages in China,” Guevara said.

Monique Cornelio-Pronove, chief executive officer of Pronove Tai International Property Consultants, noted the same pattern of behavior from Chinese and Japanese investors.

“We see, manufacturing corporations moving out of Japan and China. China, particularly because of the higher labor costs and taxation,” Pronove said in another interview.

With the potential for new foreign investment shaping up, Pronove said noted the need to provide more incentives to attract foreign companies.

“The tax holidays—and of course it’s gonna hurt. But as I’ve said, it’s a push and a pull. It creates jobs. Once you have investments there’s an accompanying ripple effect,” she said.