The growth of the business process outsourcing (BPO) industry appears to be without let up.
According to a recent report from Pinnacle Real Estate Consulting Services, the BPO industry in the country is currently filling up office buildings even with the faster pace of new supply. A total take up of around 40,000 square meters of office space has been filled up by BPO companies in the past three months.
The BPO industry has over 1,000 companies and employs over one million people as of end-2014. The Information Technology and Business Processing Association of the Philippines (IBPAP) expects the industry to generate $20 billion by 2016. The World Bank meanwhile estimates a total revenue of $20 billion by 2020.
Also according to Pinnacle’s Real Estate Market Insight for September, the overall vacancy rate of major business districts in Metro Manila is below three percent even with the new buildings coming online. In fact, Quezon City Grade A buildings are practically fully leased out and the average rent remains unchanged at P625 per sqm per month.
Meanwhile, for the residential market, Pinnacle research and consulting director Jojo Salas disclosed around 5,500 new residential condominium units are expected to be completed in the major business districts before the end of the year.
A previous Pinnacle Report noted the National Economic and Development Authority (NEDA) estimated the housing need is over 800,000 per annum, of which 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, the report said.
It also disclosed the Housing and Urban Development Coordinating Council (HUDCC) approved in its June 8 meeting the adjustment of the economic housing loan ceiling to P1.7 million from P1.25 million which will give a chance to average income earners living in highly urbanized cities to avail of a higher loan for economic housing. The general notion is that average income earners are priced out in highly urbanized areas and are forced to buy-through-mortgage housing units that are far from their places of work, Pinnacle said.
What appears to be more exciting though is the growth in the retail as well as the hotel and gaming markets.
As pointed out by Pinnacle in its report, the retail market with its various platforms is again being aggressively pursued by the top developers, because of its power of recurring income. While residential sales are generally brisk, once a project is fully sold out, a developer would have to do it all over again for another project in a different location. A strategically located shopping mall, on the other hand, would provide steady annual net income.
The report revealed the SM Group has a total net income of P18.7 billion for the first half of the year, and almost 60 percent comes from recurring income. For its retail business, it has 52 SM Stores, 41 SM Supermarkets, 43 SM Hypermarkets, 127 Savemore stores and 27 WalterMart stores. The SM Group recently acquired three Cherry Foodarama stores that are scheduled to reopen before the holiday season and teamed up with the Indonesian Alfamart to venture on the operations of initially 50 minimarts. For community malls, SM’s joint venture with by DoubleDragon to put up 100 CityMalls is well underway. The partnership already secured 32 sites all over the country and intends to open 25 stores by 2016.
On the other hand, Ayala Land Inc. (ALI) is planning to open at least five new shopping malls in the next few years in line with its goal to earn a net income of P40 billion by 2020. It also plans to develop the nine-hectare mixed-use complex in Parañaque City with an anchor shopping mall. The Ayala Land Group earlier secured a 45-year lease for the 9.2-hectare property from the Wenceslao group, the owner of the Aseana Business Park complex, for the project, Pinnacle reported.
The report likewise noted COSCO Capital Inc., the listed company of Puregold’s Lucio Co, recently acquired RFC mall along Alabang Zapote in Las Piñas City. RFC has a total lot area of about 7,600 sqm and a gross floor area of about 23,000 sqm. The acquisition will add to the Group’s existing 35 stores with a total GFA of 343,000 sqm. Cosco/Puregold Group is planning to open eight stores in the next three years.
Not to be left behind is the Megaworld Group which is planning to put up 20 malls in the next five years. As earlier reported by Pinnacle Research, the Vista Land Group is integrating its retail platforms with its housing projects. The group intends to open six to seven “AllHome” annually over the next five years.
Another player making its presence felt is the Cebu-based Gaisano-owned Metro Retail Stores Group, Inc. (MRSGI). It recently opened its 20th branch in Luzon, located in Calamba, Laguna. The Gaisano Group has grown its hypermarket portfolio to 12 stores in just three years. In total, it has 46 stores in key cities around the Philippines.
Equally exciting are the developments in the hotel and gaming market.
Again, the Ayala Land Group is leading with plans to invest as much as P30 billion in the next five years to put up Seda hotels across the country. It is even considering bringing the Seda brand abroad. The Ayala group currently has four Seda hotels located in Bonifacio Global City, Cagayan de Oro City, Davao City and Sta. Rosa, Laguna, the Pinnacle report said.
While the Robinsons Land Group appears to be silent in the retail market front, it is steadily increasing its budget Go Hotel which currently has nine hotels and is gearing up for its 10th location, probably in Davao. The nine sites are in: Bacolod, Butuan, Dumaguete, Iloilo, EDSA-Mandaluyong, Ortigas Center, Otis-Manila, Puerto Princesa and Tacloban.
To boost hotel development, the Department of Tourism (DOT) is motivating developers by endorsing for incentives a total of over P12 billion worth of tourism projects with the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA).
DOT identified nine hotels that will add 651 rooms to the industry. These are: Windored Hotel, Discovery Primea, Amanpulo Villas, Best Western Ivy Wall Hotel, Blue Palawan Beach Club, Seda Atria Hotel in Bohol, Executive Tulip Apartelle in Davao City, Belian Hotel, and Eskaya Beach Resort and Spa.
Let us hope that all these developments continue. The reason why the real estate industry has a very high multiplier effect in the economy is because even during its time-consuming and labor-intensive construction phase, a lot of people benefit from it. When the products are finally turned over to the buyers, economic activity continues as we see it in the shopping centers, hotels, and casinos.
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