Posted on March 16, 2016 09:46:00 PM [ bworldonline.com ]
By Krista A. M. Montealegre, Senior
Reporter
THE COUNTRY’S biggest property
developers are embarking on massive capital expenditure (capex) programs this
year, with the strong economy seen sustaining the strong demand for office
space, according to the Philippine associate of global property advisor
Savills.
In a briefing yesterday, Antton
Nordberg, research and consultancy manager at KMC MAG Group, said real estate
firms -- mostly listed in the Philippine Stock Exchange -- could spend an
all-time high of P369 billion this year, surpassing the record investment of
P360 billion last year by 2.5%.
“Developers are encouraged to spend more
because there is high demand. The demand especially in office and commercial is
just tremendous. End-user demand is so high and investors are tapping that by
building more real estate,” Mr. Nordberg said.
The biggest spenders, according to Mr.
Nordberg, are Ayala Land, Inc.; SM Prime Holdings, Inc.; Megaworld Corp.; Vista
Land & Lifescapes, Inc.; Filinvest Land, Inc.; DMCI Property Developers,
Inc.; Robinsons Land Corp.; and Federal Land, Inc.
The 2016 capex budget will mostly fund
the development of large-scale mixed-use communities, mostly commercial
components such as office and retail, Mr. Nordberg said.
“When the real estate boom started,
residential sales were the sweet spot. It seems that the residential market is
becoming more saturated that’s why developers are shifting to the commercial
side,” Mr. Nordberg said.
With the strength of the Philippine
economy -- one of the fastest growing in Asia -- more global companies are
transferring operations as well as production and manufacturing to the country,
creating more demand for office space.
In 2015, net take-up for premium and
Grade A office spaces reached an all-time high of 459,000 square meters (sqm.)
driven by the BPO sector, said Rosario P. Carbonell, director for commercial
leasing & sales at KMC MAG Group, with take-up likely to hit similar levels
this year.
Should the Philippines maintain its
current growth trajectory, companies from other sectors such as financial
services and insurance can create additional demand ranging from 20,000 sqm. to
as much as 100,000 sqm. for traditional office space, Ms. Carbonell said.
Makati kept its position as the “most
premium CBD” in Metro Manila with an average monthly rental rate of P980.80 per
sqm.
Vacancies in Metro Manila are likely to
increase in the next three years even with strong pre-leasing activity due to
the entry of some 1.8 million square meters of office spaces, most of which are
located in Makati, Bonifacio Global City, Alabang, Quezon City and the Manila
Bay area. The entry of new supply is expected to ease growth in rental rates in
most sub-markets in the coming years.
From a global perspective, the
Philippine capital is one of the most attractive office markets in Asia,
according to Savills’ World Office Yield Spectrum.
Manila has the fourth highest Grade A
market yield at 8% in December 2015, with Hanoi being the highest followed by
Ho Chi Minh and Adelaide. Market yield is derived by capitalizing current
market rents, which includes the rent payable by the tenant and the value of
any incentive paid to the tenant, against current capital value for office
buildings.
In terms of Grade A Effective Yields,
Manila placed third globally with an effective yield of 7.5%, with Hanoi being
the highest followed by Ho Chi Minh. Effective yields are derived by capitalizing
current market rents, which includes the rent payable by the tenant and
excludes the value of any incentive paid to the tenant, against current capital
values for office buildings.
“Globally, much of what happens in 2016
will be dependent on the course the US Federal Reserve takes with regards to
interest rates. The movement of US interest rates will determine how currencies
behave, how trade flows, and how capital moves around the world,”KMC Mag Group
Cofounder and Managing Director Michael McCullough said.
“Risk premiums of between 2% and 3% in
most office investment markets around the world continue to look like fair
value, so we anticipate ongoing strong international demand in office property
in 2016,” Mr. McCollough said.
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