Vista Land offers high-quality, ‘competitively- priced’ BPO tower in Taguig
official press release
The prospects continue to look good for the Philippine property sector this 2017, backed by strong economic indicators in the last three months of 2016.
The average full-year GDP growth at 6.8% of the country remained among the fastest in Asia in 2016. The strong performance of the economy hinged mainly on the brisk development of the industry sector, driven mainly by the construction business and the services sector which was fueled by real estate, renting and business activity.
From an average of 1.8% at end 2016, the inflation rate continued to rise in the first quarter of 2017, averaging 3.2% due to the depreciation of the local currency against the US dollar, and the higher cost of electricity and oil attributed to disruptions in the Malampaya natural gas. Despite this, the Bangko Sentral ng Pilipinas (BSP) expects average inflation to remain close to the upper limit of its inflation target range of 2% to 4% for 2017.
Overseas Filipino (OF) remittances also increased during the quarter. As of February 2017, OF cash remittances amounted to USD 4.3 billion, a 5.9% growth year on year (y-o-y).
JLL, the leading property consultant in the Philippines and a Fortune 500 company, has underlined that these strong economic numbers have given life to the property sectors particularly office space and residential.
DEMAND GROWTH FOR OFFICE SPACE REMAINED POSITIVE
JLL, whose expertise is focused largely on office space, says the growth of demand here in Manila is constantly on the rise.
The total stock of existing office space of Prime and Grade A developments in Metro Manila rose to 6.1 million sqm in 1Q17, up from 4.0 million square meters in 2016. Major central business districts (CBDs) such as Makati, Bonifacio Global City (BGC) and Ortigas continue to corner most of the existing Grade A developments, with other urban districts such as Eastwood City, Araneta Center, Eton Centris, UP Ayala Technohub, Alabang, Bay City and McKinley Hill also exhibiting positive growth in office supply.
The positive growth in the demand for office space has tempered the average vacancy rate in Metro Manila in 1Q17 at a low of 4%. Among the sub-markets, Bay City and Ortigas CBD recorded the lowest vacancy rates at 1% and 2%, respectively.
Overall rents in Metro Manila exhibited an increase quarter on quarter (q-o-q). Makati CBD commanded the highest rents in Metro Manila in 1Q17, ranging from PHP 650 to PHP 1,390 per sqm per month. BGC followed, with rents ranging from PHP 650 to PHP 1,170 per sqm per month.
Capital values in Metro Manila inched up q-o-q on the back of maintained investor interest. Makati CBD commanded the highest selling prices in 1Q17, ranging from PHP 108,000 to PHP 198,000 while BGC had a range of PHP 112,000 to PHP 155,000 per sqm.
JLL says delays in the completion of some office spaces in 2016 have pushed up new supply in 1Q17. Biggest demand for office space comes from the offshoring and outsourcing (O&O) industry which has become enticing because of the cost-efficiency and low attrition rate in the Philippines. But to sustain the growth momentum in the O&O industry, there needs to be a shift to high-value sectors such as healthcare, financial services and animation.
Meanwhile, other industries which have shown high demand for office space are firms from marketing, advertising, media, finance, banking and online gaming sectors.
DEMAND FOR RESIDENTIAL SPACE ALSO RISES
Demand for residential property remained healthy in 1Q17, primarily driven by the IT-BPO industry and remittances coming from overseas Filipinos (OF). Vacancy rates in the luxury condominium market in Makati CBD and BGC continued to dip to 3.1% in 1Q17 from 4% in 4Q16. Demand drivers in the luxury market included expatriate employees in the offshoring and outsourcing (O&O) sector, while demand for mid-range condominium units is primarily coming from the over-all improvement in the income level of Filipino workers (due to increased employment and livelihood opportunities) and support coming from OF remittances.
Despite a slowdown in residential development launches in Metro Manila in 1Q17, the HLURB issued licenses to sell (LTS) to approximately 11,800 residential condominium units. Makati CBD and BGC maintained their positions as having the highest rents, ranging from PHP 630 to PHP 1,000 per sqm per month for mid-range units and from PHP 720 to PHP 1,790 per sqm per month for high-end units. Mid-range residential units in the Ortigas/Mandaluyong sub-market had rents of PHP 400 to PHP 690 per sqm per month.
Meanwhile, capital value growth outpaced rent growth. Average capital values of luxury condominiums in Makati CBD and BGC in 1Q17 increased by 3.8% q-o-q. BGC and Makati CBD continued to command the highest selling prices in Metro Manila, with capital values in BGC ranging from PHP 112,000 to PHP 185,000 per sqm for midrange developments and from PHP 152,000 to PHP 192,000 per sqm for high-end developments. Meanwhile, Makati CBD prices ranged from PHP 110,000 to PHP 160,000 per sqm for mid-range developments and from PHP 175,000 to PHP 263,000 per sqm for high-end developments.
JLL predicts that from now thru 2021, approximately 125,000 residential condominium units are expected to be added to the total stock of the Metro Manila residential market, most of which are located in Makati CBD and its outskirts, Ortigas CBD, BGC, Quezon City and Bay City.
Meanwhile, the completion schedules of some residential developments may be pushed back, similar to other property developments, due to the ongoing scarcity of construction workers.