THERE’S a decent medium-rise hotel located near the Manila South Cemetery and abuts the Makati Central Business District (CBD).
The hotel has no lavish frontage. Residents from informal settlements nearby have put up a makeshift basketball court across the hotel entrance.
There was no competition around the area, but operating the hotel became tougher as there were less people renting a room, a person familiar with the matter said.
The owner recently sold the hotel to a Chinese who holds a license for Pogo, short for Philippine Offshore Gaming Operator. The hotel will be repurposed as both a gaming facility and a dormitory for Chinese workers.
This business decision reveals how Pogo and the Chinese are changing the face of the property industry. In fact, Pogo may have even saved the country’s property sector last year.
“But I keep on asking people how long [is this] going to last? And everybody is asking the same thing; nobody knows,” Isidro A. Consunji, chairman and president of DMCI Holdings Inc., said.
Cornering demand
MANY feared 2017 was the start of the cyclical downturn of the property industry, which has been growing since the 2007 to 2008 global financial crisis.
The fidgeting among the industry players was partly caused by the inability of the government to release Philippine Economic Zone Authority licenses to many buildings meant for the business-process outsourcing (BPO) sector.
Data from property broker Leechiu Property Consultants, however, showed that office takeup for Metro Manila still reached an all-time high of 775,000 square meters. Such amount is 23 percent higher than the previous year’s takeup of 630,000 square meters.
The BPO industry took up less than half of the demand. The offshore or online gaming segment, to note, took up the slack and cornered some 30 percent of the demand.
Leechiu said this year’s office takeup will be close to a million square meters as the BPO industry will want more office space and Pogo will continue to grow. And while there will be some 1.2 million square meters to be added to Metro Manila this year, about a fifth of it will be likely delayed. This is a sign that developers are deliberately slowing down construction.
Many questions
ACCORDING to Frederick Rara, manager of KMC-Savills, another property broker, the pipeline of construction is only for this year and announcements for construction activities beyond 2018 are getting few and far between.
“We’re only focusing on the vacancy [of buildings]. We have enough slack, so it is okay for them not to build right now. But what if the takeup and rental growth [becomes] faster [than they could build],” Rara said in an interview.
He added the broker is still awaiting for developments for this year.
“Are they going to push through with the construction or are we going to change the product line to residential or office leasing? These are the questions being asked right now especially if you are a developer, and you own a land but you don’t know what you will do [with such asset] next,” Rara said.
Over the past decade or so, the property market only showed pockets of development, mainly in mixed-use facilities such as the former military camp in Taguig, the reclaimed lands of the Mall of Asia complex in Pasay, the neighboring Entertainment City in Parañaque and older CBDs of Ortigas and Makati.
Pogo explosion
DEVELOPERS such as Andrew Tan’s Megaworld Corp. were constructing buildings meant for a specific BPO company, a strategy it used over the last two decades. Such strategy ensures the facilities have takers.
However, here come buyers from mainland China. And with prices increasing, the equation suddenly went awry with Pogo occupiers.
The arrival of buyers and Pogo occupiers began late 2012 when Communist China cracked down on gambling. A slew of Pogo licenses targeting Chinese gamblers were released some time only in 2016, upon the assumption of Duterte as the most powerful man in the Philippines.
The licensing of Pogo exploded barely two years later and thus is redefining the property market in the country in the process.
DMCI’s Consunji said half of the company’s overseas sales are now coming from mainland China. About half of total sales were from local buyers and the rest were from abroad, traditionally from overseas Filipino workers (OFWs).
OFWs, however, cannot afford their product anymore as prices climbed between P4 million and P4.5 million per unit of a condominium, Consunji said.
Such is evident on all of its projects that are scattered in Metro Manila, such as in Pasig, Quezon City, Mandaluyong and in the bay area.
Consunji said they are trying to control Chinese buyers.
“Our worry is that we may have too many absentee residents such as what you see in Shanghai and Beijing where you have totally sold buildings but nobody is living there. It’s kind of out of our objective. Our objective is to sell to [an] end-user, preferably to local end-users,” Consunji said. “It may not look nice if one segment of our development is empty.”
Still cheaper
DMCI is not alone in attempts to manage sales, especially to the Chinese.
Data from Ayala Land Inc. also showed buyers from mainland China also took up half of international sales last year, mainly in its mid-segment brands Alveo and Avida.
International sales comprised about a quarter of its total sales, which Consunji said is almost the same as DMCI Homes sales.
Property companies also follow the 60-40 rule, in which they can only sell 40 percent of their units to foreigners.
Consunji said such phenomenon has suddenly placed the Philippine property sector on the global investment map.
“Our prices here are much cheaper at, say, P90,000/square meters to P100,000/square meters. Compare that to P600,000/square meters to P700,000/square meters in other neighboring countries. In Japan, they are selling it at P1 million per square meter,” Consunji said, adding that the Philippine property market has a long way to go.
Meanwhile, the former owner of the hotel near the Manila South Cemetery now owns a building in Cubao, Quezon City.
The person familiar with the hotel owner’s business said the property is being repurposed as a dormitory.
The owner believes dormitories are now fueling the demand side of the property sector, the person said.
Image credits: Photosounds | Dreamstime.com
