Residential segment remains vibrant

Share

According to Pinnacle Real Estate Consulting Services Inc.’s market insight, the Philippines s real­estate market con­tinues to perform well. It is sup­ported by Oxford Business Group’s (OBG) “The Report: Philippines 2014,” which says the outlook for the real­estate sector in the Philippines is looking positive, as the demand for quality housing is expected to remain high on the back of a strong economy and renewed investor con­ fidence. And Colliers International Philippines Research said the de­mand is so high that even with new projects coming up, vacancy levels in prime districts should remain below 5 percent for the next two years.

In fact, based on Urban Land In­ stitute and PricewaterhouseCooper’s research “Emerging Trends in Real Estate 2014,” Metro Manila ranked fourth—from 12th place last year— among Asia Pacific’s most attractive markets in real­estate investment and development prospects, particu­larly in the residential, office and retail segments.
This favorable ranking was at­tributed to the country’s fast ­grow­ing economy, increasing popularity among multinationals seeking out­sourced services, young demograph­ics and strong capital inflows from overseas Filipino workers (OFWs), among others.

However, this is true not only to Manila, but to the rest of the country. As OBG puts it, cities across the Philippines are getting a face­lift. “With the country riding high on a wave of investment­rating upgrades, this growth—as far as the real­ es­tate and construction sector is con­cerned—has only just begun.”

“No longer is the Philippines an underestimated market,” said CBRE Philippines Chairman and Founder Rick Santos. “We expect 2014 to be an unprecedented year in real­ estate investments for the country.”

Among the property segments, the residential market remains the most vibrant, with high ­end and luxury residential properties seen as promising. According to CBRE Philippines Senior Director for Research and Consultancy Jan Paul D. Custodio, this is driven by the restrictive cooling measures in China, Singapore, Hong Kong and Malaysia, giv­ing potential buyers the incentive to go into these types of housing here.

High­end housing
A study conducted by the Chamber of Real Estate and Builders’ Associa­tions Inc. (Creba) said the residential market continues to be very active. The high ­end segment, it cites partic­ularly, remains to be strong, and many top brands have been introducing prod­ucts catering to the rich and famous.

Currently rents for high­ end condominium units are well above P200.000 per month, depending on the floor areas. Rents in the villages, given the very limited supply, range from P300,000 to P500,000 per month.

The OBG also cites the Philippines as among those with the lowest office ­lease rates in Asia, with a rough $26 per square foot in the Makati Central Business District (CBD)—the most effective in Asia as compared to $179 in Beijing, $102 in Singapore and $50 in Jakarta. This is a contrib­uting factor to the increasing foreign businesses entering the country, which results in a greater number of expatriates entering the market and demanding luxury residences and condominiums in CBDs.

CBRE says the prime areas for luxury residential projects are gen­erally located within the business districts of Makati and Fort Bonifa­cio—the districts that attract high­ income and expatriate populations, the primary drivers of the high­end segment in the country.

According to Colliers Interna­tional Philippines Research, upcom­ing housing supply in the Makati CBD and Bonifacio Global City is expected to account for almost 60 percent of fresh supply by 2017. The study fore­ casts an average of 5,880 residential units will be completed each year un­ til 2016, leading to a total supply of over 78,000 units in CBDs covered by its research.

CBRE said the residential sector, particularly the high­end segment, will experience growth, as the neigh­ boring countries will experience re­ strictive cooling measures in their economies. This will accelerate the de­velopment of luxury residential properties in Bonifacio Global City, Makati, Boracay and other high ­end development areas.

However, with all the prime ar­eas already divided among top developers, the lack of areas to develop will lead developers to focus more on land­banking activities.
Pinnacle explains that the prevail­ ing low­ interest rates and high liquid­ity allow both developers and buyers access to various financing schemes. Developers continue to tap the avail­ ability of financing from banks, which assures them access for funds for land banking and complete ongoing residen­tial projects. This high ­liquidity regime, likewise, gives their projects a better likelihood of being sold, as this would open their units to a larger market, lo­cally and internationally.

Midmarket and affordable segments
The midmarket is humongous and can be cracked with the prevailing low interest rates and high­ liquidity regime, said Pinnacle Director for Research and Consulting, Jojo Sa­las. Until 2019, residential inven­tory is seen to hit 176,610 overall, of
which 96 percent, or 169,820 units, are midrange, and only 4 percent, or 6,790 units, are in the premium level.

While the growing number of expatriates is causing waves in the high ­end housing segment, the coun­ try’s young population is seen as a key demand driver in the lower­end segment, as newly employed profes­sionals move out of their family homes and seek their own indepen­dent living space.

The business process outsourcing industry, with its enormous growth in the recent years, has also been influencing the movement of the real estate industry, not only in terms of office space, but also residential projects.

CBRE said the shifting work schedules of the industry involving young professionals has caused the employees to rent or purchase con­ dominium units or apartments near their workplace because they find it safer and more convenient.

Likewise, OFWs– many of whom already reaching “maturity” for working more than 20 years abroad, according to Philippine Allied Chamber of Real Estate Brokers and Licensed Salesmen Inc.– have shown interest in purchasing condominium or housing properties for investment or personal use.

The Bangko Sentral ng Pilipinas also said 30 percent of OFW remittances are targeted for real estate investments.

Affordable housing also became more affordable to the mass market. Since the mid-and low-end markets belong to a big segment with tight competition, a lot of players are competing to produce the optimum products at the lowest possible monthly amortization.

Looking ahead
The OBG notes concerns that in­ creasing property prices could create a bubble and drive up inflation. The International Monetary Fund even warned the government of a “domestic asset­price bubble,” following the orga­ nizations data. This showed that the year­on­year increases in Philippines property prices since 2011 were higher than those in Indonesia and Singa­ pore. It noted with alarm that nominal prices of high ­end residential proper­ ties rose 8 percent annually, with rents increasing more than 15 percent.

Still, the residential sector – from the high end to the affordable ones – remains in step with economic growth.

Creba reports the midmarket is very competitive and location­-specific, and the demand for affordable and socialized housing has been north of 3 million. The marketing, however, is based on volume and highly sup­ ported by a number of government agencies, and the margin per unit is relatively lower.

Top property developers say va­cancies in premium residential and office space in prime business dis­tricts are likely to remain scarce in the years ahead.

By: Janica Monick Riego, Business Mirror, March 26, 2014

Orion Support Incorporated (OSI)

Dear Rick,

Following up from my initial request to you for support in finding a new office location for our company, Orion Support Incorporated.   Well, we moved in to the LTA Building on Perea Street, fifty meters or so from Paseo de Roxas this weekend, only a 4 minute walk to AmCham and under excellent terms.

While I think you assigned both Morgan Mcgilvray and Sherdil Rana to support our original request; as you know, Morgan was very tied up with his wife giving birth during the period we identified this location and negotiated with the landlord, Mr. Mike Arroyo. Yes, the former First Gentleman. But in my short interaction with Morgan, I can see that he is a solid, young professional.

With regards to Sherdil, I want to tell you that with 35+ years of interviewing hundreds and hundreds of individuals, I was impressed with his professionalism, focused support and “can-do” attitude  from the point of identifying our potential office space, and through the negotiation stages prior to the signing of our 6 year contract.  I was impressed with his considered opinions, insightfulness with regards to Philippine business culture and his sage advice related to our strategy in the negotiation process.  Sherdil was able to negotiate a rental rate per square meter about 150 – 200 pesos less than the going rate in this area, and with only a 7% increase after 24 months. Add to that, he secured for us three parking slots at no additional cost, two months security deposit versus the standard three, and two months advance rent to be applied to the front end of our contract versus the back end as is the case in most rental contracts. And, he got the landlord to repaint the entire office with three coats of mildew resistant paint at their expense.   But best of all, we were given a 6 year lease, with only having to give two months notice and forfeit only our two month security deposit to move out anytime with no additional penalty!

JOIN THE CBRE COMMUNITY

Receive our latest industry research, news and updates by signing up.

Want to Unsubscribe?

Contact

Manila Office

10F Ayala Tower One & Exchange Plaza
Ayala Triangle, Ayala Avenue, Makati City
1126 Philippines

T +632 752 2580 | F +632 752 2571
ricksantosteam@cbre.com.ph

Cebu Office

Unit 1505, 15th Floor, Ayala Life - FGU Center
Mindanao Avenue,Corner Biliran Road
Cebu Business Park, Cebu City
6000 Philippines

T +032 318 0070 | +032 236 0462
ricksantosteam@cbre.com.ph

Contact Us | Sitemap | Disclaimer/Terms of Use | Privacy Policy | © 2012 CBRE Philippines, Inc. All rights reserved: Part of the CBRE Affiliate Network

For inquiries, fill up the form below.

Name

Email Address

Subject

Message

For inquiries, fill up the form below.

Name

Email Address

Subject

Message

For inquiries, fill up the form below.

Name

Email Address

Subject

Message

We would like to hear from you on how we can serve you better. Please fill out the form below and we will get back to you as soon as we can.

Name

Email Address

Subject

Message

Captcha

CAPTCHA code

Share