KMC MAG sees growth continuing for PHL real-estate industry in midterm
Business Mirror by Roderick L. Abad, 08-31-2014
THE Philippine property sector is in the "sweet spot," which,
according to a real-estate services firm, is seen to continue in
the coming years.
"The market is doing very well. It's very exciting because of
such big developments from these developers. They're making huge,
huge investments, which will make really interesting landscape and
new communities coming up in the future," KMC MAG Group Managing
Director Michael McCullough told the BusinessMirror.
Based on the company's midyear report, foreign-direct investment
(FDI) in the country has increased to $1.9 billion, with real
estate accounting for around $57 million. Investors can still
expect more positive news in the residential market as it remains
to be the main growth driver for the property industry, along with
the office sector. "This is the biggest year ever for residential
in terms of supply," the executive said. "Residential is the
majority of the construction. It has the majority of the new
supplies, and the majority of the gross leasable area that's coming
up." The report shows that first-time homeowners will have more
options, as the housing supply is seen to pick up in the coming
year. Since they have the capability to invest in condominium
projects, developers have shifted their focus to the middle-income
market. "The middle-income and low-cost demand in Metro Manila is
expected to keep the market demand buoyant and occupancy rates
high, even as we see growth slowing down in the high-end segments,"
McCullough said, adding that additional supply will come in.
The information technology-business-process outsourcing (IT-BPO)
still fuels leasing in the retail market. Rental growth in this
area stood at 7.9 percent year on year.
Net take-up was at 100,000 square meters (sq m) in major
financial districts. It is projected to balloon to 280,000 sq m
this year once the market absorbs the majority of the new supply.
Apart from IT-BPO, small and medium enterprises pushed growth in
the serviced office market, especially in areas outside of Metro
Manila, such as Bulacan, Pampanga, Cavite and Laguna. Strong demand
is seen to continue over the next few years as prime office supply
in financial districts will remain low until 2016.
With the upcoming economic integration in Southeast Asia
next year, McCullough said that it will make the country more
attractive not only as a destination of choice for tourism, but
also for business.
"So I think there will be a lot of business-to-business
opportunities coming in. Of course, those guys will need offices.
And that's going to drive the office demand even higher," he said.
As for retail, a growing middle class is what inspires developers
to continue with their expansion plans. Since they have disposable
income, their purchasing power increases.
"Retail is obviously a driver of the economy because if few were
cashed up, they spend a lot of money. Hence, retail occupancy is at
the highest as it has ever been," McCullough said, citing that such
property segment is likely 99.9-percent fully leased out.
Among the big industry players, the SM Group of Forbe's
magazine-acclaimed richest Filipino Henry Sy Sr. is keen on
investing P38.8 billion in areas outside of Metro Manila. It is
looking at expanding its mall portfolio to 7.5 million sq m, or
nearly half of the total retail space in the country. Ayala Land
Inc. is planning to operate 500 convenience stores within the next
five years. Also, it has entered a joint venture with Rustan's for
the opening of the first Wellworth department store in Fairview
Terraces. To keep up with the influx of tourists in the country,
the hotel and gaming market is also getting a boost, with an
estimated inventory of 9,500 new rooms in the pipeline, mostly in
the Entertainment City in Manila Bay and the rest of the
Among other developments, Anchor Land and Accor Group have tied
up to redevelop a property in Old Manila into a five-star boutique
hotel. Ayala Land and Mandarin Oriental Hotel Group, likewise,
forged an alliance for co-development of a new luxury hotel in the
old Mandarin Hotel's location in Makati City.
McCullough added that their team is currently doing the project
infrastructure management of the Manila Bay Resorts project in
Entertainment City Manila, with over 2,000 rooms. "So we
actually have a pretty deep insight how big the people are thinking
of that. The market for that could be really, really huge. It may
not be as many overseas gamers as they're hoping, but it could be a
lot of local gaming," he said.