Business World by Francis Anthony T. Valentin, 06-09-2014
WITH THE COUNTRY'S robust economic performance, Metro Manila's real
estate sector is expected to continue its
The Philippine economy in 2013 grew
7.2%, defying expectations in spite of the
disasters that hit the nation. It was the
highest macroeconomic growth in Southeast Asia, edging out Indonesia (5.8%),
Vietnam (5.5%) and Malaysia (4.7%).
"At the forefront of the country's ecohOmic expansion is the real estate market,
which continued its robust performance in
all property sectors," Michael McCullough,
managing director of KMC MAG Group,
said in the company's report titled "Metro
Manila Property Outlook: 2014."
Based on the data from the National
Statistical Coordination Board (NSCB),
the services sector - led by the trade and
real estate, renting, and business activities subsectors - remained the key driver
of the economy's growth byway of its 7.1%
At constant prices, the real estate, renting and business activities, in particular,
grew 8.4% in 2013, depicting a booming
real estate market.
Last January, Urban Land Institute
(ULI) and PricewaterhouseCoopers
(PwC), in its study titled "Emerging
Trends in Real Estate 2014," named
Manila as the fourth best real estate
investment market in AsiaPacific, outranking the likes of Sydney, Singapore
The study cited the country's rapid
economic growth, popularity as an outsourcing destination, and improvement
In governance issues as grounds for the
According to KMC MAG, in its separate study, Manila's status as a preferred
investment market is "derived from
compressed cap rates in the developed
markets, and can provide better yields
As per the ULI and PwC report, cap
rates in the region vary between 9%
and 10%. Furthermore, office takeup
reached a total of400,000 square meters
(sq. m.) last year.
Manila, above all, was rated by ULI
and PwC as the "best bet" in residential,
office and retail sectors.
For the residential sector, Colliers
International, in its own study titled
"Philippine Property Market Report"
for the first quarter of 2014, estimates
an increase in supply for the next three
years. It expects 20 new residential con
dominiums, amounting to 7,748 units,
to be turned over this year alone. In the
coming three years until 2017, there will
be an average delivery of 8,180 units, for
a total of 90,436. Ninetyfive percent
of these developments will be concentrated in the central business districts
(CBDs) of Makati City, Fort Bonifacio
and Ortigas Center.
One consequence of the delivery of
these new supplies, however, will be the
rise in vacancies, especially in Makati
CBD where vacancy rate is expected
to soar to 11.2% as the demand cannot
keep pace with the supply.
Meanwhile, KMC MAG's study identifies investors and expatriates as drivers of demand for highend apartments
in premium residential condominiums.
The middleclass, likewise, will drive
demand for subdivisions, townhouses
and condominiums as a result of their
increasing purchasing power.
In the office sector, the business
process outsourcing (BPO) industry
is a guaranteed growth propeller. According to KMC MAG's study, the BPO
industry has kept the leasing markets
in the region active. In addition, the
industry's positive outlook bodes well
for Manila as it is still considered a
desirable destination for outsourcing
services, owing to its Englishspeaking
work force and affordable labor costs.
The study also anticipates the BPO
industry to propel the future annual
takeup to 400,000 sq. m.
Supplywise, as Colliers reveals, expansion in Makati CBD will hit a plateau. However, there will be expansions
outside of it, mostly in Fort Bonifacio
and Ortigas Center. Fiftyfive percent of
almost 450,000 sq. m. of office space will
come from these two CBDs. Also, locations in Mandaluyong City, Quezon City
and Pasay City are considered as alterna
tives where 350,000 sq. m. of office space
is to be delivered by 2016.
The competition for available space
has also prompted rental rates in Makati
CBD to swell. Grade A rents had a 1.5%
increase quarter on quarter, while Grade
B had 1.4%. Colliers calculates an appreciation rate between 5% and 8% in the
next 12 months in this area.
Developments in Metro Manila's retail
sector are very optimistic. According to
Colliers, more than 190,000 sq. m. of retail space was delivered in the first quarter of 2014 alone, considered the highest in any given quarter. An additional
150,000 sq. m. is expected to be added to
the 5.7 million sq. m. of Metro Manila's
retail stock by the end of the year.
Moreover, the report adds that in order to take advantage of the increasing
purchasing power of consumers, retail
developers have been establishing retail
areas with smaller configurations as well
as district and neighborhood centers to
entice target sectors.
Expansions undertaken by two of the
biggest property developers, for instance,
attest to the confidence of retail develop
ers in pursuing retail projects. SM Group
recently renovated its property, SM Megamall, by adding 101,000 sq. m. of space
to house its new wing that accommodates more than 100 retail stores, most of
which are global brands. Ayala Land, on
the other hand, opened a new mall called
Fairview Terraces in Quezon City that
has an area of 114,000 sq. m.