(First of Two Parts)
The Philippine real estate industry, and the economy in general, are quietly moving forward despite the distracting backdrop of various politicians jockeying for position as focus on the campaign for the 2016 national polls takes center stage.
The country’s gross domestic product (GDP) grew by 5.2% during the first half of the year based on the latest Philippine Statistics Authority (PSA) data. This is below the 6%-target, and underspending by the government is the usual punching bag especially now that national elections are looming. But government spending is expected to accelerate due to the number of approved, and ongoing infrastructure projects.
Real estate developers and players are banking on more sales by the end of the year, and are planning to take advantage of the increased spending during the election season.
For top players in industry, wait-and-see is not the way to go. Armed with double-digit earnings, supported by liquid financial market, and incisive analysis of the different real state markets and segments, they are going for gold. The Ayala Land Group is building township projects in 25 additional cities. One of these is Alviera, a 1,100-hectare large-scale master-planned development, in Porac, Pampanga.
The Ayala Group is likewise redefining the Balitawak-Quezon City landscape and skyline with the development of an 11- hectare property. The first phase includes a two-hectare shopping complex and a 250-bed hospital specializing in cardiology and cancer due for completion in the same year. It is also developing “Vermosa”, a 700-hectare area that spans the Cities of Dasmariñas and Imus in Cavite.
Micro cities, build them and they will come
The SM Group is building “micro cities” around its shopping malls. This includes apartments, offices and hotels to maximize the value of its property holdings. At least fifteen of the SM shopping malls are on large land that can accommodate high- density and mixed-used developments. SM Group intends to pour Php 100 billion of investments in the sprawling 600-hectares Manila Bay reclamation that would turn the property into a master-planned, integrated and mixed- use community.
SM Group also plans to increase its current 52 shopping malls to 75 by 2018. Recurring income from its malls is a main source of profitability of SM Group. It almost doubled its first-half net income from Php 9.8 billion last year to Php 18.7 billion this year. Recurring income accounts for Php 11.2 billion according to a recent study.
The projects for the rest of the year include opening three more malls, 12,000 to 15,000 residential units from subsidiary SM Development Corp., the opening of Conrad Manila at the Mall of Asia Complex as well as the Park Inn by Radisson Clark in Pampanga, and the start of construction of residential projects in Chengdu, China.
Retail mall race, and townships
The Megaworld Group has been busy with its five new townships all over the country. Recently, the group announced its intention of building 20 malls in the next five year. While Megaworld has been successful with its sales, mall operation spells recurring income. Thus, the group is joining the retail mall race.
The Vista Land Group already unveiled 27 projects in the previous months that may rake in Php 20.7 billion of sales. It intends to launch more projects before the year ends at an estimated sales value of Php 15 billion. More importantly, the Group has been beefing up its AllDay and AllHome retail platforms to drive recurring income. Vista Land is also building office spaces presumably to get a slice of the BPO market.
DMCI and Rockwell Groups are also beefing up their residential projects. DMCI is allotting Php 60 billion for its 12 projects next year. Rockwell is developing a township project in Iloilo. It recently launched The Vantage at Kapitolyo in Pasig City and the East Bay Residences in Muntinlupa City.
Bullish office market
The BPO industry is expected to generate US$ 20 billion by 2016, according to the Information Technology and Business Processing Association of the Philippines (IBPAP), The World Bank is even estimating a total revenue of US$ 50 billion from the BPO industry by 2020, according to a September study. Major players are already talking about moving up in the value chain.
Whatever the level of growth, the BPO industry is currently filling up office buildings even with the faster pace of new supply. Pinnacle Research monitored a total take up of approximately 40,000 sqm of office space that had been filled up by BPO companies in the past three months.
Residential market on upswing
Delivery of new residential condominium units are expected for the rest of 2015. Approximately 5,500 units are expected to be completed in the major business districts. These upcoming projects include Park Terraces Tower in In Makati CBD; West Tower, Meranti Tower and Sequoia Tower in in Bonifacio Global City; and One Shangri-La Place North Tower in Ortigas Center. Real estate developers are typically motivated to turnover units for them to collect the full payment and realize their profits.
Top players are not shy with their new launches with SMDC leading the way. The SM Group launched projects such as SMDC’s Trees Residences, Grass Residences and Shore Residences 2 with a projected total of more than 9,000 units. DMCI introduced its Asteria and Ivorywood projects, while Ortigas & Company launched “The Maven”, third tower of its Capitol Commons project in Pasig. The Ayala Land Group has consistently packaged its residential projects with mixed used and township developments.
To some, these figures may appear to be high. Based on the previous Pinnacle Report, the National Economic and Development Authority (NEDA) estimated the housing need is over 800,000 per annum; of this, close to 400,000 households annually can afford to buy housing units while the remaining households are mainly from the informal settler families. The private real estate developers typically target to carve a market share from this 400,000 per annum demand for housing all over the Philippines. (To be continued)