The Philippine real estate industry has high hopes to surge again after an intense downfall due to the global financial crisis and oversupply of infrastructure construction in 2009. Luxury residences declined in demand and price. Office space rents in Metro-Manila dropped dramatically. A vigorous supply and low demand for space became the rationale for the affected industry. Despite the decline, both local and foreign business investors are looking towards a better market in 2010.
2010 elections, plans for reform and move-ins from the new supply of space can be the reasons for the optimism of the real estate industry in the Philippines. The construction of more residential and office space buildings in prime locations are signs of the positive growth and confidence of investors in the country. The BPO industry is still the primary source of the demand on the commercial market. Michael McCullough of Makati-based real estate brokerage company, KMC MAG Group says that the continuous entrance of BPO companies in the Philippines can help swallow the vacancy levels. As for the residential, overall vacancy in Makati CBD condominium units declined from 8.5% to 7.5% in 3rd quarter of 2009. Although statistics show Fort Bonifacio is taking the lead in development and rising demand.
Premium office rents (Prime and Grade A) are falling due to its decline by 4.8% in 4th quarter of 2009 with prices down from P880 per sq m/month to P825. Despite this scenario, a rental growth of 5 to 10% can still be probable for 2010. Around 600,000 square meters of space will be accessible by 2014, and more vacancies might mean trouble. Due to competition, rents might still be suppressed or be flat for awhile.
Yet on a positive note, according to Gregory Kittelson, Managing Director of Kittelson & Carpo Consulting, there is a continuous increase of foreign BPO companies registering businesses and starting operations in the Philippines. Not only are there still large and multinational companies setting up captive outsourcing operations, we are starting to see a major surge in the small and mid size companies enter the Philippines at an even faster growth rate. Hence, the need for smaller office space in existing commercial buildings is on the rise.
The Philippine economy still plays a significant role in the industry, and how it grows or declines can impact investors, renters, and buyers. Even overseas Filipino workers affect the real estate business. As global recession occurs, OFWs who were pimary clients for residential were also affected. Cashing out their investments or placing more properties on the rental market has kept residential prices stable.
Despite the turmoils in the business, developers continue to invest in real estate. SM Development Corporation expanded its residential buildings tremendously in 2009. Ayala Land and Megaworld Corporation, despite their decrease in sales, continually develop communities of homes and condominiums. Ayala’s Avida has expanded from houses to towers and Megaworld is building condos in Greenbelt and Forbes, Makati. The target market differs, though. SM caters to Class B and C while Megaworld and Ayala focus more on luxury residences.
The industry outlook for 2010 shows market stability which is paving the way for more opportunities for real estate developers. Real estate is stretching to CALABARZON (CAvite, LAguna, BAtangas, Rizal, QueZON) and other suburban areas. In the metropolis, Rockwell and Fort Bonifacio remain as the most expensive locations for residential and commercial office space.
KMC MAG Group, a fast growing real estate brokerage firm in Makati, continues to grow its services and client roster. The company has a steady set of clientèle which they advise and provide assistance in their search for leasing office space in Metro Manila. They are a full service real estate firm which caters to companies locating in the Central Business Districts of Makati, Fort Bonifacio, and Ortigas.