Published on Thursday, 05 September 2013 00:00
Malaya Business News Online - Philippine Business News | Online News Philippines
The transfer of jurisdiction of Bonifacio Global City may have an impact on the continuity of business of companies in the area, property experts said.
“The current operations of BGC have enabled it to continuously attract occupiers and achieve values that are comparable to Makati CBD (central business district). Ultimately, the undisrupted flow of business operations will be the key to further investor confidence in BGC,” said Sharon Saclolo, research manager at Jones Lang Lasalle.
This was following a recent Court of Appeals decision transferring the jursidction of BGC among other properties in Fort Bonifacio, to the city government of Makati from Taguig.
“Any potential change in jurisdiction over BGC may initially cause some change in investors’ perception of the district because part of the decision to locate there may be ascribed to its current administration and overall management,” Saclolo said.
Saclolo said the current tax structure in BGC “is one of the factors that contribute to the appeal of the district to locators.”
“Any changes in policies may affect the smooth flow of operations, from the changes in reporting procedures, to the percentage of applicable taxes. Disruption in operations may affect the efficiency of locator firms in the performance of their functions, so stakeholders in the district hope disruptions are minimized and limited to the initial stages of transition, if and when it materializes,” she said.
Colliers International, another property consultancy firm, said some traditional office locators are not covered by special tax privilege like those located in buildings declared as information technology zones which cater to business process outsourcing companies.
Jie Espinosa, director for office services of Colliers Philippines, said the surge in lease rates in BGC has brought their levels that are “nearly equal” to the prevailing rates in the i CBD. The slight disparity in rate is offset by the lower business tax imposed by Taguig on businesses.
The differential comes to about to about “50-60 percent.”
“Rent-wise, leasing rates between Makati and BGC are nearly equal. With neglible difference, what makes the difference is the tax,” said Espinosa.
Karlo Pobre, Colliers research analyst, said lease rates for Grade A office space in BGC and Makati are at P756 and P745 per square meter per month.
The past several years saw BGC becoming a fast growing CBD, ranking second in terms of leasing rate next to the 200-hectare of most prime CBD of Makati.
Makati CBD was the first-centrally planned community and has been recognized as the prime business district in Metro Manila for over 40 years that has remained the benchmark for property prices and rents,” Saclolo said.
Among the major selling points of BGC is its proximity to Makati CBD, which makes it a very accessible alternative location, has a lower daytime population and more available land for future development.
Saclolo said that the “weighted cost-benefit trade-off between fees” is one of the “multiple factors” considered by management in their decision.
“The onset of potential change in the local government jurisdiction over the district may bring about management uncertainty for occupiers,” she said.
“Current policies and practices in the district may change but the degree of change and transition to this change may be a matter of contention. Real-estate consultants may also have to review their previous forecasts for this market,” she added.
Jones Lang Lasalle noted that BGC started offering office developments in 2001 with a 40,000 sqm leasable space, which has grown to approximately 600,000 sqm. at present.
“Future developments to be completed by 2016 will contribute another 700,000 sqm.,” said Saclolo.
About 18,000 units of residential developments were completed since 2000 with another 18,000 units to come on stream in the next five years.
“Positive investor sentiment is evident as prices and take-up rates of office and residential space have reached levels comparable to Makati CBD,” Saclolo said.
“Land values have exhibited accelerated growth rates over a short period, doubling in ten years mainly due to heightened investor interest for office buildings buoyed by an increasing number of offshoring and outsourcing tenants. This movement in the office market also feeds demand for residential, hotel and retail space in the area,” she added.
For the next two years, BGC will have four more major retail projects to complement an existing four since 2004. It is likewise set to house four new hotel ventures, in addition to the two currently in operation.
BGC is part of a 700-hectare disputed area which borders Makati City, Taguig City, Pasig City and the Municipality of Pateros.
It is being developed by the joint venture of Bases Conversion and Development Authority and the consortium of Ayala Land Inc. and Campos-led Evergreen Holdings , Fort Bonifacio Development Corp.