THERE’S still no way but up for the property industry, as it continues its growth trajectory, along with all the macrofundamentals, pointing to the country’s strong economy, according to Pinnacle Real Estate Market Insight report for the first quarter of 2017.
The study reveals that the office market is constantly bolstered by the business-process outsourcing (BPO) sector that keeps on taking up spaces, either for their expansion or new facility requirements, amid concerns over the protectionist policy of US President Donald J. Trump.
“Ultimately, business decision to outsource service may be more efficient as compared to outsourcing manufacturing that may face additional tax backlash from the US federal government,” said Jojo Salas, director of research and consulting at Pinnacle Real Estate Consulting Services Inc. “The consensus is that when US companies outsource the service component, the Philippines remains to be on top of their list.”
Because of the ever-increasing population, demand for housing and residential units is not being met, as that of commercial-retail and hotel that have been underserved, as well. Likewise, manufacturers here and abroad have been searching for suitable industrial spaces, as well, to set up plants or production sites.
“With this kind of growth, a lot of companies will continue to grow to serve these various real-estate demands,” he said.
Office
THE Information Technology-Business Process Association of the Philippines (IT-BPAP) Roadmap 2022 shows that there are 1.2 million people employed in the BPO industry at present, and this headcount is anticipated to grow to 1.8 million in the next five years.
Since every additional BPO employee translates to basically a need for 3 square meters of work places throughout the country, BPOs’ demand for office space continues to be strong, resulting in high occupancy levels and stable rents.
What’s also giving a boost to this real-estate segment is the pre-selling activity that remains vibrant.
Based on the Pinnacle report, all of the central business districts (CBDs) in Metro Manila are estimated to have an inventory of 8 million sq m of Grade A office buildings or better. Makati has a handful of them.
While the office stocks for Grade A and Prime Grade A are high, Salas noted that overall vacancy across these financial hubs is approximately 2 percent, even with the operation of new buildings.
“Most of the buildings ‘coming online’ are preleased, with limited office space available for lease,” he said.
Landlords continue to command the office market. Alongside the very high occupancy are the increasing rents.
Even if locators prefer the Bonifacio Global City (BGC) and Makati CBDs, rent-conscious ones, especially for their secondary offices and expansions, don’t mind going to other major trade centers for the lower rent. What’s also driving them to go there is their desire to tap the labor market in a different area.
Rents in Makati went up, where the weighted average rate per month in Premium Grade A buildings is P1,400 per sq m; Grade A buildings, P930 per sq m; and Grade B and C buildings, P720 per sq m. New supply of office buildings opened doors these past months to cater to the rising demand.
While the take-up is strong, according to the executive, overall rents in other CBDs are generally unchanged in the last quarter.
On a monthly basis, the weighted average lease fee in BGC is P930 per sq m; Ortigas (for Grade A office buildings), P660 per sq m (stable); Alabang, P670 per sq m (unchanged); Bay Area, P680 per sq m (slight uptick); Quezon City, P700 per sq m (slight increase).
Salas cited that selling of office spaces is also on a steady rise, with Makati and BGC leading the pack, with prices of new buildings reaching over P200,000 per sq m. “Makati CBD has a sizable number of not-so-new buildings that are attractive to buyers,” he said.
Premium Grade A towers are generating capital values of P180,000 per sq m, while Makati Grade A buildings average P120,000 per sq m.
Residential
REQUIREMENTS for housing, in general, has been steady, the Pinnacle study revealed. Because of this, metro fringe areas are now explored to serve this demand, Salas said. This is evident in the footprint expansion of major developers and local players building up various dwelling projects outside of Metro Manila.
The same situation in the residential market could be attributed also to competitive pricing scheme and delays in turning over new buildings due to shortage in skilled workers.
“Even in construction, some developers have experienced lack of skilled laborers in the past three quarters to fast-track construction and delivery of real-estate projects,” said the director of research and consulting at Pinnacle. “[So] investment-buyers are now testing the rental market.”
Per the study’s estimates, housing units in the metropolis from January to March 2017 aggregated to 210,000. Of the condominium developments in Metro Manila, 44 percent of which would be high end (priced over P7 million per unit); 37 percent, middle midmarket; and 19 percent, lower midmarket (priced less than P3 million each unit).
The lower and economic segments are seen to grow in the coming quarters since the approval of vertical socialized housing and increase of economic housing price ceiling to P1.7 million.
Still, Makati and BGC dominate the high-end residential products, especially those units for leasing, on the back of the hiked concentration of expatriates and local executives.
Luxury condominium units command the highest lease rates that go at about P1,000 per sq m a month, or P300,000 for big units of 300 sq m. Some units in Rockwell, Makati and BGC even hit the P1,100 per sq m level.
Typically, the rental range for luxury two-bedroom and three-bedroom units is between P120,000 and P250,000 depending on the size, location and furnishing. For the luxury and high-end segment, there are limited choices for lease.
Retail
THE “malling” phenomenon apparently exists, as various shopping establishments continue to pop up across the country, not to mention the influx of foreign retail brands penetrating the domestic market, which eventually eat up mall spaces for their shops.
The stable demand for this real-estate segment, likewise, comes from further expansion of the big players, the study indicated. Given these factors, Salas emphasized the obvious proliferation of various lease channels.
“Top commercial-retail developers are ever-increasing their retail platforms and products,” he said.
Pinnacle Research monitored that the SM Group is operating 60 shopping malls nationwide for a total of 7.7 million sq m, and seven in China, with 1.3 million sq m gross floor area.
The Gokongwei-led Robinsons Group, on the other hand, has 42 malls. Meanwhile, the Cosco/Puregold Group operates 329 stores all over the country, comprising of 277 Puregold stores (mixed sizes), 12 S&R membership shopping warehouse, 23 S&R New York Style QSR, nine NE Bodega Supermarkets and eight Budgetlane Supermarkets.
The smaller platforms, like SM Hypermarket, Savemore, Robinsons Superstores, convenience stores and many more, are also mushrooming elsewhere.
Salas said commercial-mall rents have remained very stable—with combined average rate at P1,200 per sq m a month—and this property segment is still a landlord’s game.
Hotel, gaming markets
PINNACLE observed that the excitement goes on for hotel and gaming, as the supply and attraction diversify.
All these boil down to the increasing tourist arrivals and tourist spending in the country, according to Salas.
Based on data from the Department of Tourism (DOT), visitor arrivals last year totaled 5.97 million, slightly missing the target of 6 million tourists. However, this is 11.31 percent above 2015 figures.
Revenue-wise per visitor receipts, tourism activities for 2016 generated earnings of P230.13 billon, or 1.11 percent higher than P227.62 billion posted a year ago. The 6-million mark is still targeted this year.
From January to February 2017, a total of 1,210,817 visitors arrived in the Philippines, representing a surge of 10.88 percent, from the accumulated 1,091,983 arrivals for the same period last year.
In terms of revenue, the first two-month period visitors generated an amount of P40.08 billion this year against 2016’s P49.43 billion, or a decline of 18.92 percent.
“This means that while there is an increase of almost 11 percent in arrivals, they are spending less, at least during the first two months of the year,” Salas explained.
The Market Insight report estimated that there are over 20,000 deluxe hotel rooms in Metro Manila. This is boosted by the entry of more foreign brands, like the recent opening of Conrad Hotel in the SM Mall of Asia complex operated by the Hilton Group, and The Okada Manila of the Tiger Resort, Leisure and Entertainment Inc.
What’s more, leading developers are strengthening their local brands, whether they have foreign brand partners, the study added. The Robinsons Land Group, for instance, has been growing its Go Hotel operations, while Ayala Land Group is rolling out its Seda brand.
The Vista Land Group is set to open six hotels under the Mella brand. Second-tier Eurotower Group is, likewise, ramping up its operations of the Eurotel and Sogo branches, as well as integrating residential condominium project in the hotel mix like the Vivaldi Cubao in Araneta Center.
Following the recent hosting of the Asean official meetings, the government has been focused on generating arrivals by hosting the remaining legs of this regional event marking the 50th anniversary of the Asean, as well as other international happenings, like the Asia-Pacific Economic Cooperation summit.
In addition, the DOT and its attached agency, the Tourism Infrastructure and Enterprise Zone Authority, have been promoting the country’s tourism and ancillary infrastructure.
Salas expects that more hotel, gaming and leisure products will be offered across the Philippines now that the Bureau of Internal Revenue’s Revenue Regulations 7-2016 is implemented, which spells out the fiscal incentives that can be given to firms operating inside tourism enterprise zones under the Tourism Act of 2009.
Industrial
AS foreign manufacturers continue to keep tab on the Philippines where they will put up factories, their local counterparts also seek more spaces for their expansion. Eventually, this trend leads to pent up demand for industrial sites, the Pinnacle study revealed.
The Market Insight research monitored an increase in the number of operating economic zones as reported by the Philippine Economic Zone Authority (Peza) web site.
At present, there are 358 operating economic zones nationwide. These include 73 manufacturing economic zones (MEZ), 243 information technology parks/centers (ITP/C), 21 agro-industrial economic zones (AIEZ), 19 tourism economic zones (TEZ) and two medical tourism parks/centers, or a total of 358 economic zones.
The number of economic zones being developed remains 145, of which 29 are MEZ; 104, ITP/C; six, AIEZ; and six, TEZ.
Since industrial spaces are typically sprawling, average lease on land of selected zones ranges between P55 per sq m to P70 per sq m per month, while average rent of select factory spaces is P190 per sq m a month.
Bullish expectation
SALAS sees the “big guys” will always optimize their competitive edge to keep their luster and remain relevant in this ever-vibrant real-estate industry.
“With increasing demand for office, residential, commercial-retail, hotel and industrial products, real-estate developers are forecasting growth and there are various ways of achieving that,” he said.
Metro Manila is still the top market, alongside Metro Cebu. There is also strong drive for efficiency of office, mall and hotel operations.
“What is interesting to note is that even the top developers are not satisfied in just doing ‘more of the same’, but are bold enough to offer new products and product mix in the market,” Salas noted.
He added that small- and medium-size real-estate firms have high hopes to fill up gaps in the market, provided they do their due diligence and avoid competing head to head with the giants.
“In short, there is an opportunity for everyone to shine under the sun,” he stressed.
Source: http://businessmirror.com.ph/still-no-way-but-up-for-property-sector/
