‘Flight to quality’ boosts demand in the property sector
By Bernie Cahiles-Magkilat, published in Manila Bulletin.
Demand in the local property sector is now geared into "flight to quality" as more multinational companies prefer to locate in "cool" office spaces to show off to clients and to attract new talents while upscale residential units have become affordable for the emerging Filipino middle class.
Leading property management firm Jones Lang Lasalle (JLL) and the countrys' top two property developers – Megaworld Corp. and The Net Group – confirmed this new phenomenon as supply for both residential and office spaces are just enough to meet brisk demand at the launch Wednesday of the 5TH Philippines Property Awards.
Lindsay J. Orr, JLL country head and chairman of this year's property awards competition, noted of a "flight to quality" or to the luxury property market for units priced at P15 million. Orr said this luxury sector accounts for only five percent of total property developments in the country but brisk demand is expected in the coming years.
"There is going to be a pent up demand for this type of property both in the residential and office sectors. The prognoses in that market is pretty good onward for more grand developments," Orr said.
He cited also increase in prices for luxury developments starting at P200,000 per square meter citing the latest offering of Park Central property, where the old Mandarin Hotel used to occupy, fetching at P300,000 square meter. The latest offering of Ayala Land's Premier Park Central is priced starting from P32 million to P477 million for the three-level penthouse.
"This is really raising the bar and already at par with Singapore properties. That demonstrates there is a demand and take up is pretty brisk," Orr said.
There is also an interesting rise in the demand for high quality offices for MNCs and their captive clients with Bonifacio Global City as the most popular choice for location.
Orr attributed the growing demand for upscale residential and office spaces to the overall growth of the emerging middle class, which are now moving into the mid to high-end property development.
"As salaries grow higher, luxurious units have become more affordable fueling a flight to quality," Orr said noting that the bulk of the small and cheaper units at P1.5 million to P3 million per unit have been taken up by younger BPO workers, who want to locate in areas closer to their places of work.
"Market continues to be very active despite political scene with strong demand in residential and office space for BPOs still very much business as usual."
For 2017 alone, there are 1.3 million square meters of spaces available of which 50 percent have already been pre committed. Another one million square meters of supply are coming in 2018 as demand is catching up.
Raymond Rufino, executive vice-president of The Net Group, said its 7 office buildings in BGC have been serving the demand of upscale tenants that are now moving into this new business district. He cited the likes of its new tenants such as Coca Cola, P & G, Google Philippines that have opted for quality office spaces in one of its buildings.
"We are seeing corporate growth and tenants who are willing to pay for good quality space and good location," he said. Already almost 100 percent of its units have been leased out of which 70 percent went to BPO companies.
Rufino also noted that as competition for hiring the right talents get stiffer, companies would also like to show off their "cool offices" to attract new talents noting that workers also want to work with a company with grand office.
"What we are seeing are tech companies, MNCs and some captives leasing from us because having a cool office is a great tool for recruitment because there is now a war for talent," he said. This cool office space would easily impress an applicant to want to work in there.
"The moment they step in they would say 'I want to work here' like the Google Philippines office," he said. Companies have also made as an attraction the qualities of their buildings like it is a green building so workers become less sick and stay healthy because the building is designed for healthier work environment.
Jericho P. Go, senior vice president of Megaworld Corp., said they are pursuing high end developments especially in Mackinley Hill, West and in the upscale Uptown BGC, among others.
"We have very good exposure because we have the advantage of the availability of our land bank," he said. Megaworld has 105 hectares in the BGC area alone.
"There is a huge demand for MNCs to locate in BGC, which is now where the strong demand for property is concentrated on," he said.
Go also explained that companies used to locate in different sites to ensure redundancy of operation, but that strategy has changed because that is no longer cost efficient. This time, companies tend to consolidate their operations in one building or in the same area so they can share board rooms and talents.
With its huge landbanking outside of Luzon, Go said Megaworld is building upscale developments like the Davao Finance Center, new high-end projects in Cebu, Iloilo and Bacolod.
You may access the original article through this link: http://business.mb.com.ph/2017/02/05/flight-to-quality-boosts-demand-in-the-property-sector/