The Philippine real-estate industry has remained in good shape at the tail end of last year, with the new administration in place, and is expected to sustain its strength through 2017, according to Pinnacle Real Estate Consulting Services Inc. (Precsi).
As per the property consultant’s report, dubbed “Business As Usual—Market Insight Q4 2016,” the ensuing wait-and-see attitude of the market toward the economic situation in the country under President Duterte is steadily paving the way to take advantage of the supply-and-demand gaps across all property segments. What triggers the rise of additional developments is the stable economy, complemented by low-interest regime, the study revealed.
It was noted that the Philippine GDP increased by 7.1 percent in the third quarter of 2016, surpassing the 6.9-percent and 7-percent growths posted in the first and second quarters, respectively.
“This is a strong signal that the government, businesses and consumers are now spending more as compared to the relatively lackluster GDP growth rate of 5.8 percent in 2015, which was a year prior to the national elections,” said Jojo Salas, director of research and consulting at Precsi.
Current figures from Bangko Sentral ng Pilipinas (BSP) indicate that the average bank lending rate from November 28 to December 2, 2016, stood at 3.435 percent, or 0.365 percent lower than 3.8 percent by the end of 2015. The stability of bank interest rates continue amid the strengthening of the US dollar in recent months. From January to October 2016, the Philippine peso against the greenback averaged at P47.2813, as compared to the mean of P45.5082 as of 2015.
Other indicators, likewise, contribute to the constant rise of the real-estate sector, according to the study. These include the robust flow of money, either from investors abroad or overseas Filipino workers (OFWs), as well as heightened public and private sectors’ expenditure, continuous jobs generation and improved tourism.
Based on the latest BSP statistics, the inflow of foreign funds has remained healthy over the years. In fact, net foreign direct investment (FDI) amounted to almost $6 billion in 2014 and 2015. Last year it already reached $5.88 billion from January to September. The $6-billion mark, or even the $7-billion level, is likely achievable, given the economic growth and improved credit ratings of the Philippines.
OFW remittances, on the other hand, aggregated to $20.025 billion from January to September 2016, up 4.8 percent from $19.103 billion during the same period in 2015. All indications show that the money sent from abroad will hit the $25-billion mark.
Meanwhile, inflation rate for the first 11 months of 2016 rose 1.6 percent, from 1.4 percent in 2015. It is seen at 2.5 percent in November alone. This is a sign that the government, businesses and consumers are spending a lot, Salas said.
Even the labor market is showing a stride, as the latest unemployment rate is lower at 4.7 percent as of October last year as compared to 6.6 percent by end of 2015. Such is a welcome development not only for manufacturers, but also for real-estate developers.
Data from the Department of Tourism (DOT) revealed that the total visitor arrivals in the country from January to August 2016 reached 4.04 million, or 12.59 percent greater than recorded in the first eight months two years ago. Total earnings also amounted to P164.25 billion, up 7.92 percent during the two periods in review. With the aggressive DOT campaigns, the 2016 tourist arrival target of 6 million is seen achievable.
“The macroeconomic indicators presented above show the strong economic footing of the Philippines. The next step is to see if these economic factors positively impact on the real-estate market,” Salas said.
Outsourcing bolsters office take-up
BUSINESS-process outsourcing (BPO) business continues to propel the growth of the office sector, as players in this field need more and more work spaces for their expansion.
In fact, the Information Technology-Business Process Management (IT-BPM) Road Map 2017 to 2022 chalks up the industry’s growth between 12 percent to 18 percent—twice or thrice of the world’s average of 6-percent growth each year. Good thing the real-estate developers have not wasted time in recent years and were basically pacing their developments to meet the increasing demand for office space.
Approximately, there are more than 7 million square meters (sq m) of Grade A office building or better in all of the central business districts (CBDs) in Metro Manila. A handful of Prime Grade A buildings are in Makati CBD. Although the stock of Grade A and Prime Grade A offices are high, the overall vacancy across these business hubs is below 3 percent at present.
The office market remains a landlord’s domain, according to the Pinnacle study. Given the very high occupancy, lease rates have been rising and albeit slightly in recent months. The brisk demand for office space and issues on the delayed delivery of office buildings because of lack of skilled workers have eased concerns on softening rents.
Generally, leasing activities in Makati City held up. Here, monthly rental fees per square meter for Premium Grade A, Grade A and Grade B&C buildings average at P1,350, P915 and P715, respectively.
Since real-estate firms are trying to meet the strong demand with new stock, total rents remain the same in the fourth quarter of 2016. The weighted average lease rate in Bonifacio Global City (BGC) is P905 per sq m a month. That of Grade A office buildings in Ortigas, on the other hand, is still at P660 per sq m each month as older buildings weigh down the rents of recent inventory.
Meanwhile, office spaces leased out monthly in Alabang and Bay Area are a bit higher at P670 for every square meter, as those in Quezon City are offered at P680 per square meter a month due to newer buildings.
“Selling of office spaces is now a growing trend,” Salas said, while citing that less than 10 percent of the current 7-million-plus sq-m total floor area is up for grabs.
Prices in Makati City and BGC financial districts, for instance, are north of P200,000 per sq m. He expects that selling activity in the office market will rise steadily in the coming quarters.
All’s well for dwelling market
INCREASING land values have vertical developments constantly rise in populous Metro Manila, wherein the total number of condominium units is estimated to reach more than 200,000 by the end of 2016.
Citing the Pinnacle study, the executive revealed that 44 percent of the condo projects are high-end (over P7 million); 37 percent, middle mid-market; and 19 percent, lower mid-market. The latter and economic segments are seen to grow in the years to come since vertical socialized housing and the hike in economic housing price ceiling to P1.7 million have been approved.
High-end residential developments dominate the Makati and BGC skyline because most expatriates and local executives are based there. Crowded places, likewise, offer substantial vertical products, such as Manila and Quezon City with over 20,000 units and 40,000, respectively, from projects launched between 2009 and 2015. Even sparsely populated areas in the metropolis, like San Juan City, now host premium condo products.
Although the figures are staggering at a glance, nevertheless they fall short compared to the projected housing needs in Metro Manila of more than 100,000 residential units annually as per projections of the National Economic and Development Authority. While the total requirement includes the “can’t afford” segment, at least 350,000 of the projected dwelling needs in the Metro each year are coming from households that “can afford” to buy housing units.
More space for growth in retail development
PINNACLE reported that commercial retail malls continued to generate income in the fourth quarter of last year as the “ber” months and balikbayan season filled up the coffers of the property developers in this category.
The company’s research monitored that the Sy-led SM Group has 58 malls and targets to reach the 60-mall mark soon. Meanwhile, the Robinsons Group of the Gokongweis has 42 malls, as Cosco/Puregold Group owns 40 big stores.
Robust occupancy rate of malls was apparent in the latter part of 2016 and, as expected, every commercial space were rented out to take advantage of the shoppers’ propensity to spend during Christmas holidays, according to Salas.
“Commercial-mall rents have been very stable, and this property segment is still a landlord’s market,” he said.
Tourism boosts hotel, gaming facilities
THE 6 million tourist arrivals target by end of the year is likely achievable, which, according to the property consulting firm, is indeed very good news to the operators of over 20,000 deluxe hotel rooms in Metro Manila.
Key players, like the SM Group, recently opened its five-star Conrad Hotel in the SM Mall of Asia complex. Operated by the Hilton Group, this 347-room accommodation facility sits on top of the two-story high-end S Maison mall.
The Okada Manila was recently launched as the third integrated hotel and casino complex within the Entertainment City in Pasay City. This is a 44-hectare property of the Tiger Resort, Leisure and Entertainment Inc., with a total of 993 rooms ranging from spacious 60-sq-m units to luxurious 1,400-sq-m villas.
Joining the hospitality bandwagon is Vista Land Group, which aims to open six hotels under the Mella Brand soon. This is a three-four-star brand, with an ideal size of 150-room hotel development.
To encourage more players to come, the government, through the DOT and its attached agency Tourism Infrastructure and Enterprise Zone Authority, has been promoting Philippine tourism and ancillary infrastructures.
Recently, Bureau of Internal Revenue Regulations 7-2016 was signed and published. It spells out the fiscal incentives entitled to companies operating within the tourism enterprise zones (TEZs) under the Tourism Act of 2009.
“This will further boost the development of tourism infrastructure and facilities around the Philippines,” Salas said.
Pent-up demand continues for industrial hubs
BUOYED by the influx of locators to the country, various economic zones have been accredited lately by the Philippine Economic Zone Authority.
The research and consulting director of Precsi bared that there is a total of 348 economic zones operating nationwide. These include 72 manufacturing economic zones (MEZ), 234 information-technology (IT) parks/centers, 21 agro-industrial economic zones (AIEZ), 19 tourism economic zones (TEZ) and two medical tourism parks/centers.
Adding to these existing industrial hubs, he disclosed, are the 145 new economic zones being developed: 29 MEZ, 104 IT parks/centers, six AIEZ and six TEZ.
Considering that industrial spaces are sprawling across the country, the average lease on land of selected zones is only P55 per sq m a month, while that o, f selected factory spaces is P190 per sq m every month.
Business as usual
AS business continues for real-estate developers, there’s no stopping for big players to usually go for first mover advantage, Salas said.
Given their machinery, he noted that major developers Ayala and SM Groups will continue to pace real-estate developments.
It is reported that the former’s property business alone generated a net income of P15.1 billion in the first nine months of 2016. The Ayala-owned conglomerate will continue to develop townships and intend to expand its recurring income base.
The latter’s real-estate business, on the other hand, earned a net profit of P17.5 billion. The Sy family will keep on growing their recurring income developments and property sales.
Business tycoon Andrew Tan’s Megaworld Group allocated P150 billion for its capital expenditure for the remainder of 2016 and up to 2017. The Robinsons Group has been busy building condo projects for sale and expanding its recurring income base (office, malls and hotels).
The Filinvest Group, meanwhile, is appropriating P5 billion for housing and condo developments in the next three years. Also, the company is spending more on its Filinvest Corporate City.
Based on the Pinnacle study, Salas said all of the big players are competing for their market share as they expand their real-estate portfolio. He added that demand across all property sectors will continue.
The BPO and traditional companies will keep on searching for office spaces; end-users and investors will scout for suitable residences; small retailers shall continue taking advantage of Filipinos penchant for shopping; tourists will still fill up hotel rooms, and manufacturers will ceaselessly look for optimum industrial spaces.
“As usual, savvy real-estate developers will continue do their due diligence, and look for the unsatisfied demand, and supply the gap,” Salas stressed.
Source: Business Mirror | January 29, 2017
http://www.businessmirror.com.ph/property-market-seen-sustaining-strength-2017/
