Investors remain bullish on real estate sector

The Manila Times by Ritchie A. Horario, 11-20-2013

The sustained economic growth of the country is expected to further buoy positive investor sentiment toward the real estate sector, according to full-service real estate firm KMC MAG Group.

Michael McCullough, KMC MAG Group managing director, said that 2013 has been a year of opportunities for the real estate sector, owing to the consistently strong gross domestic product (GDP) growth in the first half of the year. "The factors behind such growth are the active construction industry and the business process outsourcing [BPO] sector, as well as the high rate of overseas Filipino workers' remittances," he said. He added that credit-rating achievements have increased investment interests in the Philippines, and a stable political climate under the administration of President Benigno Aquino 3rd also contributed to growth.

McCullough also pointed out that key interest rates are low, offering good debt financing opportunities for real estate. Moreover, increased commercial and residential real estate-related loans signal an active property sector. "We've seen continuously low vacancy rates, as there is strong take up within central business districts [CBDs]," he said.

Makati's attractiveness. 

He explained that Makati continues to attract more institutional investors due to relatively high yields at 8 percent to 10 percent, and there has been an additional supply of 340,000 square meters of space introduced this year, mainly in Bonifacio Global City in Taguig. Increased purchasing power of the middle class has also sustained the demand for subdivisions, townhouses and condominiums.

According to him, the strong consumer spending has benefited the retail sector, translating to an increase in gross floor area of retail space in CBDs by 337,000 square meters this year.

"Manila remains the best value city to do business, largely because of the relatively low real estate costs, and Makati remains to be the location of choice for luxurious residential spaces," McCullough said. He pointed out that favorable economic conditions and a highly skilled labor pool have attracted more international BPO firms to come to the Philippines. "The increase in foreign entry seen through the expanding BPO sector also drives the residential market, especially for high-end apartments near the CBDs," he added.

For his part, Melo Porciuncula, head of Capital Markets and Investments of KMC Mag Group, noted that the Philippine market is now prime for investment across all segments from development to acquisition. "The office market offers institutional investors the opportunities to increase cash flow and diversify portfolio. The residential and commercial spaces, meanwhile, offer retail investors viable alternatives for medium- to long-term investing," he added.

KMC Mag Group said that it is now an official international associate of Savills, a leading global real estate advisor with presence throughout the Americas, Europe, Asia-Pacific, Africa, and the Middle East. "Our affiliation with Savills enables us to capitalize on the opportunities in Southeast Asia and the Philippines. Specifically, our capabilities in asset, property, and facilities management, as well as services in the retail and residential spaces will be strengthened as a result of this partnership," McCullough said.