Good for business

It is a big relief to know there are still many in the business sector who believe President Duterte and his tough campaign against illegal drugs is good for business.

In its third quarter report, Pinnacle Real Estate Consulting Services noted that while the President has intensified his anti-illegal drugs campaign to a level where hundreds have died and thousands have surrendered, a fact which has alarmed some, it still pales compared to the campaigns in Mexico, Colombo and other countries.

But what is amazing, according to Pinnacle, is how Filipinos quickly adjust to new political realities, and how the economy and real estate market continue to chug along. The study pointed out that President Duterte’s economic policies are more business friendly, and his social policies are more populist when compared to the policies of the previous administration.

“The government has been aggressive in continuing infrastructure developments and is promoting public-private partnership projects. President Duterte has been espousing dispersed development, and has been keeping an eye in solving problems in the Metropolis as well,” according to Pinnacle director for research and consulting Jojo Salas who said these infrastructure projects would have very positive impact to the economy and the real estate market.

It noted that Duterte’s policies are not only pro-business, but also pro-people, emphasizing the President is committed to dispersing spending and development in the provinces.

In its report, Pinnacle sees a continued demand for office space from the business process outsourcing (BPO) sector, low vacancy, stable rents, a very active pre-selling market, and delays in opening new stock due to a tight labor market.

It noted that BPO industry experts are confident to reach the target of 1.3 million employees and annual revenue generation of $25 billion in the next couple of years. Though the new IT-BPM Roadmap 2017 to 2022 is scheduled to be made public this month, experts say the growth in the next five years would range between 12 percent to 18 percent, or two to three times the world’s average of six percent annual growth, the study said.

Pinnacle pointed out that buoyed by this continuous growth, real estate developers are relentless in building and delivering office spaces, with over one million square meters of office space are projected to open in the next two years in major business districts in Metro Manila, breaching the seven million square meter-mark.

The third quarter report revealed that overall vacancy is below four percent and that the office market is still a landlord’s market. Given the low vacancy, rents have been increasing though plateauing in recent months. Rents in Makati Central Business District (CBD) generally held up, where Premium Grade A buildings have a weighted average of P1,300 per sqm per month, Grade A buildings have a weighted average of P905 per sqm per month, and for Grade B&C buildings, the weighted average is P695 per sqm per month.

For BGC, the weighted average rent is P895 per sqm per month. The average rent of Grade A office buildings in Ortigas is still at P 650 per sqm per month, while Alabang and Bay Area business districts have a slightly higher weighted average rent of P660 per sqm per month. Quezon City office rents have higher weighted average of P680 per sqm per month, also due to newer buildings.

It also revealed that selling of office spaces is now a growing trend. Selling prices in Makati and BCG business districts are north of P200,000 per square meter, Pinnacle said.

The report explained that the robust demand for office space from the BPO industry is changing the landscape of a number of cities such as Baguio, Davao, Dumaguete, Iloilo, Lipa, Metro Bulacan (Baliuag, Calumpit, Malolos, Marilao and Meycauayan), Metro Cavite (Bacoor, Dasmariñas and Imus), Metro Laguna (Calamba, Los Baños and Sta. Rosa), Metro Naga (Naga and Pili), and Metro Rizal (Antipolo, Cainta and Taytay).

It said BPO companies are choosing those areas for various reasons; healthy demographics and relatively developed infrastructures are the key criteria. “Apart from office spaces, these markets would probably experience developments of the residential and commercial-retails spaces, and perhaps, hotel rooms as well. With the push of President Duterte to disperse spending and growth, development of these “Next 10 Markets” is likely to happen sooner,” Pinnacle added.

As for the residential market, the study noted there is a wide range of choices and Metro Manila fringe areas are being explored, that prices are becoming competitive though still increasing, that investment buyers are now testing the rental market, and that there are also delays in turnover of new buildings due to a shortage in skilled labor.

Pinnacle stressed that the affordable and socialized housing segments are still underserved, with the projected housing backlog at more than 5.5 million by end of 2016.

The report revealed there is still a sustained demand for luxury high-end condominium units mainly coming from local executives and expats. Makati and the BGC business districts dominate the high-end residential products. There is also a perceived oversupply of mid-market residential condominium buildings in Metro Manila. “While top players like Ayala, DMCI, Filinvest, Lopez/Rockwell, Megaworld, Federal Land, Robinsons, SM, and Vista Land Groups will continue to build due to their vast distribution channels, competing against these players for the same market segment is not advisable, “ it said.

It added it is important to monitor the leasing market in the coming quarters. Leasing of studio and one-bedroom units is stable and still ranges between P15,000 to P30,000, and may reach the P50,000 per month-level, depending on the location, furnishing, and amenities of the condominium building. Luxury condominium units command the highest rents at P1,000 per square meter per month.

For comments, e-mail at [email protected]