PHL property sector at a sweet spot–real-estate firm

By Siegfrid O. Alegado, GMA News, 10-26-2013

Prime office space in Metro Manila will still see low vacancy rates as firms, particularly those engaged business process outsourcing, continue to flock the Philippines, officials of real estate services firm KMC MAG Group Inc. said Friday.

At a briefing in Makati City, KMC MAG's managing director Michael McCullough said the group sees "continously low vacancy rates, as there is strong take up within Central Business Districts." This, even as KMC MAG expects an additional 340,000 square meters of office space, most of which are in Bonifacio Global City (BGC) in Taguig, McCullough said.

In its "Philippine REal Estate 2013 Midyear Report," KMC MAG said vacancy rates in Makati were at 3.9 percent as of June, while free office space in Ortigas andBGC were at 3.6 percent and 9.7 percent of the total stock. The higher vacancy rates in BGC was due to new projects sprouting in the business district.

BGC "is becoming the most active business district, generating almost 50 percent of the growth in the property market," the report read. According to McCollough, the Philippines continues to attract business for outsourcing and off-shoring given favorable economic conditions and a skilled labor force, fueling not only office but also residential and retail developments. Also, the Filipino middle-class' rising spending power has sustained growth in gated communities, townhouses and condominiums as well as retail space. Rising numbers of expatriates in the metropolis also drives demand in the high-end residential sector, McCollough added.

In an interview after the briefing, Jose Carmelo Porciuncula, head of capital markets and investments at KMG MAG, shared that foreigners do not only buy high-end residences, particularly condominiums, to live-in but also for investment purposes. "It think it's the good news - strong growth, investment grade rating - that is driving investments in the high-end sector," he said. 

The Philippine economy grew by 7.6 percent in the first half, the fastest in Southeast Asia. This year, the three major global debt watchers lifted the Philippines from junk status. Porciuncula, however, did not raise flags over the influx of foreigners buying real estate in the Philippines. "There is still structural demand from Filipinos who have rising incomes and expatriates. And there are restrictions governing property ownership here," he said.

While the Philippine Constitution prohibits foreign ownership of land, there is no restriction against foreigners buying condominium units. Thus, foreign fund managers and retail investors buy luxury units by top developers for investment purposes.