Decongestion and infrastructure critical to sustaining growth
Manila Bulletin.Com by Tricia V. Morente, 11-30-2014
Traffic congestion in Metro Manila may not necessarily be
a bad thing-at least, as far as real estate demand is
"It's very telling that we're now seeing a lot of interim
housing solutions in the city," says Jose Carmelo Porciuncula, head
of Capital Markets and Investments of KMC Mag Group, Inc. at the
recent property brief organized by the real estate services
The bed spacing market, according to Porciuncula, is actually
very big. While information on this segment has yet to be
officially consolidated, the Philippine capital is seeing office
workers biting the bullet at P3,000 to P5,000 a month on bed space.
"The middle class is now looking for efficiency-we're seeing
weekday houses where the family shares a one- or two-bedroom, and
then on weekends come home to their primary homes outside the city.
We're getting to a point where they can actually afford a solution
that isn't exactly cheap because you're looking at a mid-cost,
nicely made condominium worth at least P3.5 to P4 million. So while
traffic hasn't [directly] affected property development per se,
it's driving additional spending towards real estate, whether on
the leasing or acquisition side," Porciuncula says.
Be that as it may, there is an urgent need to decongest Metro
Manila. With the Philippines' continuing economic growth attracting
the attention of foreign investors, the KMC MAG Group points to two
key issues the country needs to focus on to sustain the momentum it
currently enjoys. "The long-term economic growth of the Philippines
is dependent on whether or not it can address the issue of
decongestion and make smart, sustainable decisions to improve its
infrastructure," avers Michael McCullough, managing director of KMC
MAG Group. If the Philippines can bring the growth in Manila to
other areas within the country and support that with the necessary
infrastructure, McCullough says, "We see no reason why it wouldn't
fulfill its promise of being the next Asian Miracle."
New CBDs rising
Within Metro Manila, the office and commercial property sector
remains a landlord market. "There is still so much demand,"
Porciuncula reports. Since 2009, demand has been steadily rising.
In the second to third quarter of 2014 alone, average rental rates
rose from P764.1 to P768.5 per square meter in Makati; P868.5 to
P874.3 per square meter in Bonifacio Global City (BGC); and from
P689.5 to P690 per square meter in Ortigas.
"The increase in price is driven by the shortage in supply,"
explains Porciuncula. "We're seeing single-digit vacancy rates
below five percent across the central business districts (CBDs). In
terms of take-up, that's quite impressive especially if you look at
it from a regional standpoint," he adds.
According to KMC MAG Group Vice-President Yves Luethi, efforts
to decongest the metro have become more visible, with business
parks and special economic zones being built in provinces outside
Metro Manila, such as Cavite, Laguna, and Batangas, and in areas
outside Luzon like Cebu, Davao, Cagayan de Oro and Zamboanga.
"Within the metro, investors and developers are exploring Quezon
City and Bay City as potential central business districts to spread
out job opportunities, foot traffic and even investments more
evenly within Metro Manila," Luethi says, adding that his firm is
seeing a lot of positive movements in Quezon City. "All the big
developers are there, and the government has been very supportive.
Green building regulations are already being implemented in the
office and commercial space. And being the largest city in Metro
Manila, it will help in bringing the workplace closer to the
people," he says.
Similarly, the emerging Bay City near Roxas Boulevard is another
area that spells great potential as a business district. Currently
established as an entertainment and tourism hub, with City of
Dreams Manila about to open and Solaire slowly winning market
share, Luethi expects to see a strong influx in the tourism sector.
Business parks and mixed-use developments are on the rise as well,
with the growing developments of ASEANA City, Federal Land's
Metropolitan Park, and the SM-backed Future City. "While land
prices are slightly increasing in these areas, we see it growing to
be one of the major hubs for office locators and entertainment.
There will be a high demand for residential as well, which will be
coming in from the foreign market," Luethi says.
Still a matter of political will
All things needed to sustain the Philippines' growth trajectory
are in place. "In terms of Metro Manila, infrastructure projects
have been proposed. The Philippines is enjoying the best credit
ratings it has ever had, and it has the knowledge and support of
institutions like the Japan International Cooperation Agency, among
others," Luethi says.
It all boils down to, not surprisingly, political will.
The tourism sector, for one, would stand to benefit from
government support especially in terms of infrastructure.
"Unfortunately, growth is stagnant at this point. If you look at
the growth rate of tourism from January to August year-on-year,
it's stagnant. We believe that the DOT's target of around 10
million arrivals by 2016 will be hard to achieve," Luethi avers,
adding that if one were to look at the hotels and leisure industry,
"ours are pretty low compared to our neighbors in Asia, which offer
the same end product actually."
With the Department of Tourism dubbing 2015 as "Visit the
Philippines" year, the country will have to invest heavily in this
area in order to grow the industry and compete with its Southeast
Asian neighbors. "The Philippines has a lot of sights and
experiences to offer but it has to catch up fast," says McCullough.
"The biggest hindrance to growth for this sector is the lack of and
quality of the infrastructure. A concerted effort by the public and
private sector to improve the country's infrastructure will not
only spark the growth of the hotel and leisure industry, it will
also drive economic activity in various parts of the country," he