Slower project completion noted

If you are wondering why your condominium developer is taking such a long time completing the project and turning over the unit to you, here is one possible reason.

Colliers, a leading diversified professional services and investment management firm, expects muted condominium completion this year due primarily to elevated interest and mortgage rates, as well as rising prices of construction materials, which recorded a 14-year high in 2022.

In fact, Colliers’ projected condominium completion in 2023 is just about a third of total units completed in 2022.

In the first quarter of 2023, Colliers recorded the completion of 1,200 units, down by 70 percent compared to the same period last year. Among the projects completed during the period are Megaworld’s The Ellis in the Makati CBD and Manhattan Plaza Tower 2 in Araneta City; Federal Land’s Mi Casa Hawaii in Bay Area; and Keyland Corp. and Ascott Ltd.’s 110 Benavidez in Makati.

This year, Colliers projects the delivery of 3,540 units, 61 percent lower compared to the 8,970 units completed in 2022. The Bay Area and Fort Bonifacio will likely account for nearly half of the new supply this year, it said.

But the good news is, Colliers sees condominium completion bouncing back in 2024, with the delivery of more than 11,000 new condominium units across Metro Manila.

According to Colliers director of research Joey Roi Bondoc, they project the Bay Area dominating condominium supply across Metro Manila in 2024 as they see the business district overtaking Fort Bonifacio in terms of condominium stock.

By end-2024, they expect the Bay Area to have about 44,200 condominium units versus Fort Bonifacio’s 43,800 units and the Makati central business district’s 29,700 units. Also by the end of next year, the Bay Area is likely to account for 27 percent of Metro Manila’s condominium stock compared to Fort Bonifacio’s 26 percent and Makati CBD’s 18 percent, Bondoc said.

Meanwhile, Colliers, in its latest report, emphasized that the demand for condominium units in the secondary market is improving due in part to improving take-up from local professionals and expatriates.

This, it noted, has been resulting in marginal improvement in vacancies across Metro Manila.

Colliers is projecting a continued recovery of rents and prices across the capital region although still below pre-COVID-19 pandemic levels.

It said that pre-selling condominium take-up in the first quarter provides some optimism, but slower launches remain prevalent as developers hold off new project launches due to a high interest rate environment and elevated prices of construction materials.

In the report, Colliers also pointed out that with prevailing rental corrections in major business districts, now is an opportune time for tenants to rent condominium units in key business hubs across Metro Manila.

As of the first quarter of 2023, lease rates for studio and one-bedroom residential units have declined by more than 40 percent in the Bay Area due to dampened demand from local professionals as well as exodus of Chinese employees from the offshore gaming sector, it said.

Better profits for airline firms

The International Air Transport Association (IATA), which represents some 300 airlines comprising 83 percent of global air traffic, has just announced an expected strengthening of airline industry profitability for 2023, which is good news for our very own air carriers, namely Philippine Airlines and Cebu Pacific.

According to IATA’s latest report, airline industry net profits are expected to reach $9.8 billion in 2023 or a 1.2 percent net profit margin, which it said is more than double the previous forecast of $4.7 billion.

It said that airline industry operating profits are expected to reach $22.4 billion in 2023, much improved over the December forecast of a $3.2 billion operating profit, and more than double the $10.1 billion operating profit estimated for 2022.

The same report revealed that some 4.35 billion people are expected to travel in 2023, which is closing in on the 4.54 billion who flew in 2019.

Total revenues are expected to grow by 9.7 percent year over year to $803 billion, which IATA said is the first time that industry revenues will top the $800 billion mark since 2019, which reported $838 billion in revenues. Expense growth is expected to be contained to an 8.1 percent annual increase.

IATA director general Willie Walsh has noted that airline financial performance in 2023 is beating expectations. He said that this expected stronger profitability is supported by several positive developments, including China’s lifting COVID-19 restrictions earlier in the year than anticipated.

He said that cargo revenues remain above pre-pandemic levels even though volumes have not. And, on the cost side, there is some relief, with jet fuel prices, although still high, having moderated over the first half of the year.
IATA likewise emphasized that the return to net profitability, even with a 1.2 percent net profit margin, is a major achievement, given that it was achieved at a time of significant economic uncertainties, and the fact that it follows the deepest losses in aviation’s history ($183.3 billion of net losses for 2020-2022 for an average net profit margin of -11.3 percent over that period).

The airline industry entered the COVID-19 crisis at the end of a historic profit streak that saw an average net profit margin of 4.2 percent for the 2015-2019 period.
Passenger revenues are expected to reach $546 billion and with COVID-19 restrictions now removed in all major markets, the industry is expected to reach 87.8 percent of 2019 levels of revenue passenger kilometers (RPKs) for the year with strengthening passenger traffic as the year progresses.

Efficiency levels are high with an expected average passenger load factor of 80.9 percent for 2023, which is very near the 2019 record performance of 82.6 percent, IATA added.
IATA’s May 2023 passenger polling data has shown that 41 percent of travelers expect to travel more in the next 12 months than in the previous year while 49 percent expect to undertake the same level of travel. Moreover, 77 percent of respondents indicated that they were already traveling as much or more than they did pre-pandemic.

However, with just $22.4 billion of operating profit standing between $803 billion of revenues and $781 billion in expenses, industry profitability is fragile and could be affected by a number of factors, including inflation, the war in Ukraine, supply chain issues, and regulatory cost burdens, IATA stressed.

A recent IATA poll of travelers in 11 global markets revealed that 81 percent of those surveyed emerged from the pandemic with a greater appreciation of the freedom that flying makes possible.

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