MANILA - 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 metropolis.
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.