Real estate consultancy firms have been reporting an increase in the demand for industrial space in the country. But why is this so? Let’s understand how by getting to know the major driver: electronic commerce.
E-Commerce in the Philippines
Electronic commerce, popularly known as (you guessed that right), e-commerce, refers to transactions that are made online. Think of trading, but digital, you get the idea.
Look around you, how many people do you think are on their phones to book a ride, order food, or get something from online shops? If you come to think of it, we are slowly fully embracing the digital lifestyle. Who would think fifteen years ago that we’ll have all these applications, to assist us with our basic needs (food, clothing, shelter)?
Online Shopping
Boxing, basketball, and beauty pageants aren’t the only things Filipinos are fond of; included in the list is shopping (that explains the numerous malls built within and outside the metro). Early this year, four Philippine (SM) malls made it to the list of Asia’s largest shopping centers, as per the World Atlas. Truly, shopping remains to be one of Filipinos’ favorite leisure activities. But shopping has gone beyond these large retail structures – today’s modern technological advancements have now enabled customers to shop at the comfort of their own homes, if not during long public transport rides going to work or school.
While mall culture in the Philippines is still alive, it cannot be denied that online shopping is slowly transforming the local retail sector, and this is evidenced by the continuous growth and increasing popularity of mobile shopping applications and internet users in the country.
As seen from the chart below, ASEAN UP and Statista illustrate the constant increase in the number of online shoppers from 2016 to 2018, and the figures are expected to climb up to 53.8 million in 2022.
2016-2018 Number of Online Shoppers in the Philippines as well as the projections for 2019-2022, in millions.
The reason for the strong liking can be attributed to the convenience and variety that digital stores offer. Online platforms have a range of categories that customers can choose from, and there is also an abundance of options per item sought, not to mention the huge discounts they offer during the holiday season. That being said, it’s safe to say that local e-commerce is thriving.
Singles’ Day SALE
Speaking of holiday season promos, the recently concluded Singles’ Day is an example of a very popular trend in e-commerce right now. The event, which started out as a shopping festival in China, has now become global and is highly patronized by Filipino consumers.
Conceptualized by students from Nanjing University, Singles’ Day or 11:11 is an almost month-long shopping shindig designed to attract single shoppers in need of retail therapy. It’s like Black Friday, but strategically targeted, and on a much larger scale. According to Picodi Research Philippines, 57% of Singles’ Day shoppers are women, while the remaining 43% are men. The most purchased goods include clothes, electronics, and cosmetics. Check out the infographic below to know more about it:
The Domino Effect: E-Commerce & Real Estate
As Philippine e-commerce continues to thrive, multiple industries continue to reap the benefits as well, like the industrial sector. With the influx of new online retailers and businesses in the country, the demand for more warehouses and other storage facilities (like container yards) are likely to be sustained. This is most true for locations outside Metro Manila, such as the Southern Tagalog Mainland, which has always been popular for its warehouses situated in modern industrial parks and economic zones.
There are no brakes in sight for e-commerce and other relevant businesses in the Philippines, as more and more expansions are set to happen in the next few years. In 2020, online shopping destination Zalora will be moving to its new Cavite warehouse facility, and Lazada will also be constructing a new warehouse in the north of Manila. Another company expected to boost its operations in the Philippines is Rhenus Logistics, a global logistics service company which has just added four new warehouses this 2019.
Embracing the digital lifestyle
It seems that the demand is here to stay because the Department of Trade and Industry (DTI) sees that by 2022, e-commerce will have the capacity to contribute 50% to the country’s GDP, which would eventually translate to a much higher demand for warehouse areas if the e-commerce industry succeeds in doing so. To add, the agency has also collaborated with the University of the Philippines (UP) College of Law, for the creation of a new e-commerce roadmap, that would cover topics such as taxation, as well as merchant and consumer protection, among others.
For as long as e-commerce is around, there will always be a demand for industrial space.
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Aviso Valuation and Advisory Corp. is a real estate consultancy firm that offers valuation and business advisory services compliant to international standards such as the International Valuation Standards (IVS) and International Financial Reporting Standards (IFRS). To assure that we only produce high-quality deliverables, as needed, we do tasks beyond the usual appraisal process like verifying pertinent property documents (i.e. land titles, tax declarations, etc.) with the appropriate government agencies for due diligence purposes prior the acquisition of the properties.
