Residential, office markets expected to continue stellar performance in ’16

WHILE 2016 has just begun, preparations are now being made to hail the Year of the Fire Monkey with a bang, when the Chinese celebrate their lunar New Year on February 8.

The whole nation is thrilled on what lies ahead this year, particularly on the political front, since this will mark the denouement of the Aquino administration and a new leadership will take over Malacañang Palace for the next six years.

With the national polls heating up, however, the economy and its growth-driving industries, especially real estate, are expected to weather the political noise.

Philippine economic development is seen in the expanding property sector as housing projects, commercial centers, workplace buildings, hotel and gaming facilities, as well as economic zones are being built one after the other not only in Metro Manila area, but also in other parts of the country.

This trend is seen to continue across all real-estate industry segments this year and beyond, most notably in the residential and office sectors.

Residential market

THE perennial housing backlog keeps on pushing the residential market’s growth, as the National Economic and Development Authority estimated the need of Filipinos for a “decent roof” is pegged at around 800,000 units per annum.

Since close to 400,000 households or almost half can still afford to buy dwelling units annually, this segment of the real estate remains the most competitive and profitable at present.

The towering heights of opportunity for both the developers and buyers still abound in vertical projects or condominiums.

In fact, the condo market accounts for the biggest share of all licenses to sell at 27 percent, according to the nine-year average of Housing and Land Use Regulatory Board (HLURB) data.

Leading the pack of developers is the SM Group, which intends to sell an annual average of 20,000 units starting 2016.

This initiative solidifies the Sy family’s market share in the condo space, said Pinnacle Real Estate Consulting Services Inc. Director for Research and Consulting Jojo Salas.

In their recent Market Insight Report, he also noted DMCI Group’s announcement that it would launch nine projects this year, with 14,000 units and estimated sales value of P50 billion.

The Consunjis also intend to generate recurring income when it launches its 36-story office project along Pasong Tamo in Makati City.

This will offer more than 40,000 square meters (sq m) of leasable area, subject to approval of permits and licenses.

Salas said the Ayala Land Group and Ortigas and Co. have packaged their housing projects with mixed-use and township developments.

Other developers are also ramping up the kick-off and completion of their projects to meet the predicted demand.

Lamudi Philippines reported that Century Property is on track to finish the construction of its luxury residential condo—the Trump Tower—by December.

Once completed, this 56-story tower in Makati City, composed of over 250 units, is the first Trump-branded condo not only in the country, but in Southeast Asia.

The property web site also revealed the scheduled opening this year of high-end 67-floor tower Shang Salcedo Place, which houses 749 units and top-class amenities.

Apart from condominiums, other residential types also offer good business and investment potentials for both the players and end-users.

Like vertical housing projects, economic housing comprises 27 percent of all licenses to sell, based on HLURB figures.

Meanwhile, socialized dwellings, as well as open-market subdivisions and townhouses account for 24 percent and 22 percent, respectively.

Pinnacle’s report shows the Ayala Group has focused on the economic housing by strengthening its projects under the Amaia brand.

It’s timely given the recent hike of the loan limit for this type of residence from P1.25 million to P1.7 million, as approved by the Housing and Urban Development Coordinating Council.

As for the socialized market, Bella Vista brand has been playing in this category, the study added.

Office segment

AS the economy surges, there’s still more room for expansion in the office sector of the real-estate industry.

Jones Lang Lasalle (JLL) Managing Director for Singapore and Southeast Asia Chris Fossick said new office supply is expected to be high in Manila in 2016 at 870,000 sq m, growing by 10 percent to 20 percent.

He said that most of the new buildings are in the central business districts (CBDs) of Makati and Bonifacio Global City (BGC) in Taguig, where there has been a shortage.

This year’s supply until 2018, however, is close to the five-year historical take-up from 2011 to 2015.

With the projected spike in the office-space inventory, a moderate hike in rental rates is likewise projected—this time at 4 percent, as 18 percent of the new supply in 2016 has been already precommitted.

This trend could still be attributed to the ever-expanding business-process outsourcing (BPO) industry, as some locators are moving up the value-chain and require more centrally located premises, Fossick said.

Based on data from the Philippine Statistics Authority, the office segment accounts for 29.4 percent of the real-estate demand in the country, largely driven by BPO at 11.3 percent.

Industry sources see the outsourcing sector to generate $25 billion in total revenues by end of the year.

Given the top figure, the BPO industry is projected to soon overtake dollar remittances by overseas Filipino workers, most likely in two years, according to an HSBC economist in a recent briefing. Job-wise, it is targeted to hit 1.3 million full-time employees in 2016, which translates to 5.2-million-sq-m office requirement.

Hence, the industry is now gearing up the “Next 10 Cities,” such as Baguio, Davao, Dumaguete, Iloilo, Lipa, Metro Bulacan (Baliuag, Calumpit, Malolos City, Marilao and Meycauayan City), Metro Cavite (Bacoor City, Dasmariñas City and Imus City), Metro Laguna (Calamba City, Los Baños and Sta. Rosa City), Metro Naga (Naga City and Pili), and Metro Rizal (Antipolo City, Cainta and Taytay).

Investment opportunities

AT the start of the new year, many of those planning to move to a new home or considering buying a property must be wondering what 2016 could bring to them.

In view of this, Lamudi Philippines takes a look at what are potentially good real-estate investment deals in the market today.

For one, Strata-titled offices are a good take, according to the real-estate portal.

Contrary to the BPO office towers constructed and rented out by property developers to outsourcing firms, they can be purchased by individual investors and buyers to lease to companies.

For those who want to diversify their investment portfolios, this property type makes a good business sense since there is a lack of supply of office space in the metropolis, particularly in major CBDs, placing an upward pressure on rental fees.

What’s more, the decreasing land-bank options in Makati City, BGC and Ortigas Center are also raising capital values of office buildings, based on Colliers International’s third quarter 2015 report.

Some of the strata-titled developments now available in the market are Alveo Financial Center along Ayala Avenue, which has 363 units and sells on average P223,000 per sq m; The Stiles in Circuit Makati (also of Alveo Land), with 283 units for P198,000 per sq m; Century Spire in Century City (Century Properties), with 283 units for P203,000 per sq m; Capital House in BGC (Avida Land), with 222 units for P142,000 per sq m; One World Place in BGC (Dai-ichi Properties), with 283 units for P136,000 per sq m; and Parkway Corporate Center in Alabang (Filinvest Land), with 390 units for P168,000 per sq m.

Apartments and townhouses are also worth investing in as they are two of the most searched property types by Filipinos at present.

Location-wise, suburban areas like Quezon City, Parañaque and Las Piñas are a top choice among the would-be investors.

Such properties are very in demand among renters, most especially for starting families, since they provide bigger spaces than condos yet they are cheaper than standalone houses.

A three-bedroom door apartment in Parañaque, for instance, averagely costs P3.5 million to P4 million, or charges P18,000 to P25,000 as monthly rent.

Because land values in Metro Manila are costly and constantly rising, real-estate developers are setting their sights outside for their next big-ticket township projects.

Among these developments include the Azure North in San Fernando, Pampanga, where Century Properties plans to duplicate the success of the same project in Parañaque; and Ayala Land’s Alviera in Porac, Pampanga; and Vermosa in Laguna and Cavite.

These developers are banking on their previous success to push these projects forward and all look to perform well in 2016, according to Lamudi Philippines.

Residential lots in subdivisions are also highly sought after given their rapid value appreciation.

Property values in the 62-hectare township called Alabang West of Global-Estate Resorts Inc., to wit, increased from P47,000 per sq m to P56,000 per sq m, or 19 percent  in the 11 months since its launch.

Around 80 percent of the 788 residential lots in this project have been already taken up.

While there is a bit slide in the mid-condo market due to massive supply, high-end vertical housing developments, especially larger ones, are projected to perform well both in capital appreciation and rental rates.

Colliers said that vacancy level is lowest for upscale condos in Makati City, which is expected at 5 percent to the third quarter of 2016.

This could be attributed to Metro Manila’s leasing market, driven primarily by expatriates and the BPO sector.

JLL reported that luxury condo rents in the metropolis keep on growing, though modestly, due to strong demand also from expatriate employees of multinational corporations.


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