January 2011 Light Residences Investor Updates

Real Estate News: Better prospects seen for condominium sector

Business Mirror
Posted on Tuesday, 07 December 2010 19:33

Global real-estate services firm Jones Lang LaSalle Leechiu continues to see strength in the Philippine residential condominium sector, with the next four years to be driven by new supply catering to the mid-end segment.

Moreover, the office space leasing sector— buoyed by business process outsourcing (BPO) companies—is expected to see an uptick in rental rates following an expected supply shortfall by 2012, the firm said in a press briefing on Tuesday.  

For the residential sector,  Jones Lang country head David Leechiu said another 100,599  condominium units in the mid-end segment are expected to come on-stream by 2014 on top of the existing 55,526 units built since 1999.

Demand for these types of units, priced from P1.5 million to P10 million, is also expected to remain steady with the favorable interest-rate environment, ready financing from banks and overseas Filipino buyers, he said.

“In 2005, no one could have imagined how deep the mid-end residential condominium sector actually was. It will continue to be a source of growth for many developers up to at least 2014,” Leechiu said.

The bulk of new mid-end condominiums is expected to come from Metro Manila, mainly in the Makati business district (28 percent), Quezon City ( 27 percent), Ortigas, Pasig and Mandaluyong (17 percent) and Bonifacio Global City in Taguig ( 11 percent), the firm added.  

With the housing deficit estimated at 4 million, units various developers have been positioning themselves to tap buyers in the mid-end segment.

Among publicly listed residential condominium developers, Jones Lang sees Sy-led SM Development Corp. to lead the pack with a 22-percent market share over the next five years from the current 4 percent.  

Megaworld Corp. follows with a 14-percent market share, Ayala Land Inc. with a tenth and Robinsons Land Corp. with 8 percent.

Jones Lang said the average annual growth rate in Metro Manila since 2005 is pegged at 8 percent, with the exception of certain areas like Bonifacio Global City and Makati City which exceed this figure.

The value of units in this segment has also gained moderately in the last five years, with the annual average at 13 percent, or P78,122 per square meter (sqm). As with rental rates, Bonifacio Global City and Makati City outpace industry growth at 18 percent and 14 percent, respectively.

Jones Lang sees residential rental rates to remain stable, given the large influx of supply.

In the office segment, however, Jones Lang sees the reverse given an expected supply shortfall beginning late next year.

“In all probability, office [rental rates] will go back to 2008 level. Prices are going to keep going up in the next five years,” Leechiu said, noting that prices have bottomed out in 2009. “There is significant growth in the BPO industry.”

The company executive explained that the average demand line for office space is at 75,000 sqm per quarter. Total supply in 2010 is expected to increase by 283,973 sqm, and by another 276,587 sqm in 2011.

But by 2012 the number will drop to 163,313 sqm. A deficit  of 100,000  sqm is expected in three years, and further to 200,000 sqm  by 2014.

-- Miguel R. Camus / Reporter

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GA Tower can be seen in the Background