Philippines moves to realize auto-hub ambitions

Siegfrid Alegado
Bloomberg News

Philippine developers are expanding into industrial parks as the government moves to make the nation a car-manufacturing hub have sparked interest from Japanese automakers.

“We haven’t seen this kind of interest from Japanese companies since the mid-1990s,” said Rick Santos, chairman of CBRE Group Inc. in Manila. “The industrial sector gets a boost from robust foreign demand.”

That is attracting builders such as Ayala Land Inc. and Megaworld Corp., which are now developing industrial properties to diversify their portfolios, recognizing the increasing demand for industrial space, said Antton Nordberg, head of research at KMC MAG Group Inc., Savills Plc’s Manila associate.

President Benigno Aquino met business groups in Japan this month, after policy makers on May 29 approved tax incentives for automakers to support production of new car models in the country. These are meant to help stimulate an economy growing at its weakest pace in three years.

“Japanese manufacturers are closely looking at setting up shop in the Philippines,” said Carmelo Bautista, president of GT Capital Holdings Inc., the Philippine partner of Toyota Motors Corp.

The average annual rent in Philippine industrial parks is as much as $5 per square meter, compared with China’s $7, according to data from CBRE.

Commercial space in Megaworld’s first industrial park, unveiled last year, is sold out, while half of the industrial lots in the park south of Manila have been sold, the company said in an email reply to questions. Tenants are mostly Japanese and Chinese manufacturers.

About 14 Japanese companies agreed last year to locate in an industrial estate partly-owned by Tokyo-based trading house Sumitomo Corp. and partner First Philippine Holdings Corp., the Manila-based company said in its annual report.

The Philippines wants a larger share of Japanese companies leaving China. After his visit to Japan, Aquino said that 11 Japanese companies signed letters of intent to invest or expand operations in the country.

CBRE estimates industrial rent in the next two years will rise at a slower pace than the country’s inflation rate — forecast at 2.5 percent next year — as developers keep prices low to attract more locators. “Right now, it’s a price war,” said Jan Custodio, head of CBRE’s global research and consultancy in Manila.

Philippine industrial parks sit on former U.S. bases and rice fields that have been turned into economic zones north and south of the capital.