Property Three more years of good times
3 January 2013
The property industry can be assured of at least more three years of vibrant activity, experts said.
The office market will continue to benefit from the global offshore and outsourcing industry, while the residential and retail space markets would still be propped up by improving private consumption.
Tourism also gets a boost as the Philippines emerges as the next gaming hub in Southeast Asia.
“It took 20 years to get the stars aligned, but now we’re looking at sustained growth and success. We are now experiencing the best real estate market in the Philippines in the last 20 years,” said Rick Santos, chairman of property consultancy firm CB Richard Ellis Philippines.
In the office space segment, demand is seen to hit a record 430,000 square meters, driven primarily by the business process outsourcing (BPO) business.
Between January and November, office space demand hit 425,000 sqm., 18 percent more than the annual average demand of 360,000 sqm. recorded in 2011.
Even before preferred office buildings are completed, companies are committing to take up space, indicating strong optimism and heightened business activity projected by the leading real estate consultancy for 2013. Pre-commitments are backed up by signed lease agreements between parties, and advanced rent and security deposits are paid.
The office space market continues to be a sellers’ market as pre-commitments more than doubled in January to November 2012 compared to the same period in 2011.
The average base rent in Grade A office spaces in Bonifacio Global City and the Makati Central Business District has gone up 15 to 20 percent since 2010.
Up until 2015, office supply set to come online is estimated to hit 7.9 million sqm with the current supply now at 6.2 million sqm. Vacancy rate across Metro Manila business districts meanwhile stands at 5 percent.
The Philippines post a “stable fiscal position and good credit standing by 2013/2014,” it expects “other demand drivers to create an additional demand of roughly 100,000 to 200,000 sqm of office space.
Traditional companies like Coca Cola and Aboitiz Group are also creating demand for office space, comprising nearly 25 percent of current demand in Metro Manila at 100,000 sqm.
Coca-cola and Aboitiz are moving to their new corporate offices in Bonifacio Global City.
Rick Santos said the Philippines “is expecting democratization in the housing sector — from a nation of renters to owners—based on low interest rates and financing schemes.”
Victor Asuncion, CBRE head of research noted the continuous increase in housing loans volume.
CBRE expects developers to focus on the mid-income residential market segment within the P45,000 to P80,000 per sqm price range.
The Philippines has the lowest interest rates and best financing schemes for home ownership today. Interest rates range from 5 percent to 11 percent for short- or long-term payment schemes.
“This has opened the opportunity for more Filipinos to become owners rather than renters,” said Santos.
Both firms meanwhile are bullish about the Philippines’ gaming prospects.
“The Philippines is the Macau in leisure and gaming of Southeast Asia,” Santos said.
“In five years, the Philippines will challenge Macau and Las Vegas in casino revenues,” he added.
The government’s entertainment complex project in Paranaque City has provided impetus for tourism development.
There are 10,536 hotel rooms in the pipeline from 2011 to 2016. An additional 5,000 hotel rooms has since been added to the figure in just six months.
“Investment in the hotels and hospitality real estate asset class is experiencing record growth. In addition, commercial properties such as Aseana One in the same district have become an attractive destination for firms seeking to do business in the proximity of the entertainment district,” he said.
The encouraging prospects of the property market are driving an affiliated industry towards optimism.
Philippine Constructors Association (PCA) executive director Manolito Madrasto said that in the same time frame of three years, the construction industry may see a reverse migration of labor, imilar to what happened in neighboring Malaysia some five years back.
“So if we keep up this growth, for the next three years, we will see a reverse migration. It’s bound to happen. All because the government finally decided what needs to be done,” said Madrasto.
Madrasto said the market overseas for local contractors “would eventually dwindle” as a result of the current global slowdown which would erode the cost competitiveness of wages in other countries.
“As the market hits a high,
I foresee that the industry will be forced to increase compensation benefits, wherein if you consider the takehome (pay if you work abroad), you would rather be here,” said Madrasto.
A study conducted by BCI Economics said the construction industry would continue to grow.
BCI said that the local construction industry is growing side by side with the economy.
BCI noted that new construction projects are seen to grow by 264 percent in 2013 with new building construction expected to grow by 145 percent.
For the first three quarters of the year, concept and design projects amounted to P678 billion. Building construction work deferral rate and abandonment rate meanwhile declined below 10 percent and 5 percent respectively, in the third quarter.