By now, Philippine President Rodrigo Duterte’s off-the-cuff remarks do not seem too far off from those of US President-elect Donald Trump.
Politicians, businessmen, and the people of both countries are gradually accepting the results of their respective democratic processes, even if these taste bitter to some groups.
Locally, the expected wait-and-see attitude is steadily giving way to taking advantage of the supply-and-demand gaps in the different sectors of the real estate market. The country’s continued economic growth, combined with low- interest regime, is compelling enough to trigger positive developments.
The next step is to see if the strong economic footing the Philippines displayed in the fourth quarter will impact the local real estate market in a good way.
Time not a-wasting
Pinnacle Real Estate Consulting Services, recently quoted forecasts by the Information Technology – Business Process Management (IT-BPM) road map 2017 to 2022 which pegged growth of the business process outsourcing (BPO) industry between 12% to 18%. This is two to three times the world’s average of 6% annual growth.
Real estate developers have not wasted time, and in recent years, have been pacing their developments to satisfy the pent-up demand for office space.
The major business districts in Metro Manila comprise over seven million square meters of grade A office buildings or better. While the office stock of grade A and prime grade A office stock seems high, the overall vacancy across these business districts is below 3%.
The office market is still a landlord’s market, and given the very high occupancy, rents have been increasing in recent months. The initial fear of softening rents has been averted due to brisk demand for office space, plus the unwelcome news of delayed delivery of office buildings due to lack of skilled workers.
Rents holding up
Rents in Makati Central Business District (CBD) generally held up, where premium grade A buildings have a weighted average of Php 1,350 per sqm per month, grade A buildings have a weighted average is Php 915 per sqm per month, and for grade B&C buildings, the weighted average is Php 715 per sqm per month.
Since developers are trying to serve the pent up demand with new stock, overall rents are generally unchanged in the last quarter. The weighted average rent in BGC is Php 905 per sqm per month. The average rent of grade A office buildings in Ortigas is still at Php 660 per sqm per month since older buildings are weighing down the rents of newer stock.
Alabang and Bay Area business districts have a slightly higher weighted average rent of Php 670 per sqm per month, pulled up by newer stock. Likewise, Quezon City office rents have higher weighted average of Php 680 per sqm per month, due to newer buildings.
Residential market
The Metropolitan Manila Residential Market is dominated by condominium developments in recent years, due to increasing land values. The estimated total number of condominium units will reach over 200,000 by the end of 2016.
Based on Pinnacle Research, 44% of the condominium developments are high-end (over Php 7 million), 37% are middle mid-market; and 19% are lower mid-market.
With the approval of vertical socialized housing and increase of economic housing price ceiling to Php 1.7 million, the lower mid-market and economic segments are expected to grow in the coming years.
Makati and BGC business districts dominate the high-end residential products due to the concentration of expatriates and local executives.
Manila and Quezon Cities are also offering substantial condominium products. Manila City condominium projects that were launched from 2009 to 2015 reached over 20,000 units. Quezon City condominium projects for the same period breached the 40,000 unit-mark.
These numbers are staggering at a glance, but they in fact pale in comparison to the projected housing needs in Metro Manila of more than 100,000 housing units per year (National Economic and Development Authority projections). While this total includes the “can’t afford” category, at least 350,000 of the projected housing needs in Metro Manila per year are coming from households that can afford to buy residential units.
Retail market
The commercial retail malls went on with their usual way of generating income.
Pinnacle Research monitored that the SM Group has 58 malls, and are targeted to reach the 60-mall mark in the very near future, while the Robinsons Group has 42 malls.
Hotel and gaming
Tourist arrivals are at pace to reach the six million-mark by end of the year. This is good news to operators of more than 20,000 deluxe hotel rooms in Metro Manila.
SM Group recently opened its five-star Conrad Hotel in the SM Mall of Asia complex as operated by the Hilton Group. This 347-room hotel sits on top of the two-floor high-end S Maison mall.
The Okada Manila was recently launched, which is a 44-hectare hotel-casino complex of the Tiger Resort, Leisure and Entertainment Inc. This luxury hotel will offer a total of 993 rooms to the market, ranging from spacious 60sqm-rooms to luxurious 1,400sqm villas.
The Vista Land Group intends to open six hotels under the Mella Brand soon.
First mover advantage
The Ayala and SM Groups continue to pace real estate developments. From the real estate business alone, the Ayala Group recorded a net income of Php 15.1 billion for the first nine months of the year. The group will continue to develop townships and will grow its recurring income base. The SM Group, on the other hand, its property business generated a net income of Php 17.5 billion. Likewise, it will continue to expand its recurring income developments, as well as property sales.
The Megaworld Group allocated Php 150 billion for its capital expenditure for the remainder of 2016 and up to 2017.
Filinvest Group is devoting Php 5 billion just for housing and condominium developments in the next three years. It is likewise spending more on its Filinvest Corporate City.
The Robinsons Group has been busy building condominium projects for sale and expanding its recurring income base (office, malls and hotels). All of the big players are competing for their market share.
