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Megaworld sees no slowdown in office, retail space demand



Posted on December 08, 2015 11:03:00 PM [ Businessworldonline.com]
By Krista A. M. Montealegre, Senior Reporter
  
MEGAWORLD Corp., owned by billionaire Andrew L. Tan, remains bullish on the real estate sector, particularly office leasing, next year, although it is keeping a close eye on the possible impact of negative external events and higher interest rates on its residential business.

Megaworld Senior Vice-President Jericho P. Go told reporters on Monday night that the property firm sees no slowdown in demand for office spaces, with plans to launch at least 100,000 square meters (sqm.) of new inventory next year -- consistent with a plan to bring in an average of 100,000 sqms. of new office space to the market until 2019.

Bulk or 60,000 sqm. of the new supply will come from its P45-billion McKinley West township in Fort Bonifacio, while the rest will come from its projects in Iloilo, Cebu and other parts of Luzon. Megaworld is adding 112,000 sqm. of new office space to its portfolio in 2015, pushing the year-end total to 712,000 sqm.

“The way we analyze it, because we have 130 tenants, we know their requirements and we know their demand. I can categorically say for Megaworld --office and retail -- no slowdown. We are even accelerating,” Mr. Go said.

Megaworld is turning over half of the new supply in McKinley West by mid-2016, earlier than the original target of end 2016 or early 2017, he added.

Megaworld, which accounts for a third of the office leasing business among listed companies, is leveraging on its stable of high-profile tenants which include Accenture, IBM, Hewlett Packard, Wells Fargo and Concentrix, among others, to drive the growth of this business.

“The biggest portion of leases comes from expansion, not new ones…

If new, they will lease by the floor. The existing ones lease by the building,” Mr. Go said.

Rental income accounts for 20% of revenues, but its contribution increases to 40% at the net income level, he said.

“As we continue to drive hard in improving our office and retail portfolio, this will continue to drive demand for residential,” Mr. Go said.

‘CAUTIOUSLY OPTIMISTIC’
While Megaworld is bullish on the office and retail sectors, the real estate firm is “cautiously optimistic” on the residential side of the business.

“For residential, we’re studying the market trends. There are a lot of factors: the devaluation of the Chinese yuan, impending interest rate hike in the United States, what happened to Paris, what happened to Greece and the Middle East with the rout in fuel prices,” Mr. Go said.

The company is assessing how these external events will impact on its unit Megaworld International, which historically accounts for 20% residential sales, comprising of units sold to foreigners and migrant Filipinos.

Megaworld is still upbeat on its prospects despite uncertainty with the national elections to be held in May next year.

“Even the analysts we’re talking to are confident that whoever wins the election, we will continue to enjoy the growth we are experiencing.

In terms of overseas Filipino remittances, we’re doing okay, we believe any presidentiable (presidential candidate) will not rock the boat,” Mr. Go said.

Megaworld is part of Alliance Global Group, Inc. -- the holding firm for Mr. Tan’s liquor, gaming and quick-service restaurant businesses.

Shares in Megaworld lost eight centavos or 1.74% to close at P4.51 each on Tuesday.
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