Property consultant sees CBDs luring investors

Business Mirror by Dennis Estopace, 09-05-2014

WITH a "very positive" outlook for the Philippines property market, real-estate services firm KMC MAG Group said investors' focus will continue to be in properties within the commercial and business districts (CBD).

In its Midyear 2014 Report, the property consultant said, "investment activity is expected to stay robust, especially in the country's real-estate sector; demand for which will be driven by attractive yields posted across all property types."

"The leasing market, driven by the IT [Information Technology]-BPO [business-process outsourcing] sector, retains a positive atmosphere [while] the residential market continues to grow at a steady rate," the report said.

On the other hand, the current positive economic situation, leading to the rise in private domestic spending, is creating an opportune condition for the retail segment of the real estate sector, the report said. "Supported by growing arrivals, the favorable investment climate for the hotel sector remains, while the serviced office market remains strong as newly opened business centers are being leased out at a very rapid pace," the report added.

According to the 6-year-old company, approximately 140,000 square meters of office space in the CBDs is expected to be completed by the end of 2014.

And while BGC and Ortigas CBDs have turned their situation around-in 2013, both cities had low supply-the Makati CBD stock is expected to stagnate in the following years.

"Looking ahead, the strong leasing demand from the BPO sector will drive the market for the coming years. This is expected to result in higher rental and capital values in all real estate segments," KMC MAG said in its report.

The company also "expects the Premium and Grade A office markets to sustain its current pace with rental rates and capital values both expected to increase 7 percent year-on-year (YoY)."

"The residential market, meanwhile, is moving in a different direction." KMC MAG said it expects developers "will continue to actively launch their new projects, shifting focus from luxurious developments to lower to mid-end segments."

"Needless to say, only projects priced at reasonably affordable levels will enjoy higher take-up, as the target buyers are increasingly coming from the middle class." Small-sized apartments may become popular, according to KMC MAG, "and large-sized units may become the bane of developers."

"The high-end residential market will only have a modest growth as a result of a weakening demand from its target market." The company forecast rates to increase barely over inflation by another 3 percent to 5 percent YoY, "keeping the gross yield within the 8-percent to 10-percent spread." "Our positive outlook for the real estate sector also extends to Manila's retail market. We foresee that retail space in prime malls may hold opportunities for a rise in rental rate, as the larger population catchment will continue to provide strong retail sales."

KMC MAG added the retail market's "sustainable" development will justify the rental increase of 7 percent to 10 percent "as shopping center landlords are in a strong position to attract both existing retailers and new brands for market entry."