Developers told to spread risk across locations, segments

PROPERTY CONSULTANTS said Philippine developers should diversify their real estate portfolios across segments and locations to manage risks amid high vacancies.

“If you are a developer and all your assets are in one city, and the area where they are located is down, then your assets depreciate,” PRIME Philippines Founder and Chief Executive Officer Jettson P. Yu told BusinessWorld.

This comes as some areas within the commercial real estate sector have experienced “persistently high vacancies and falling rents,” a spokesperson for the International Monetary Fund said.

In particular, the Philippine capital continues to face an oversupply of condominiums, with 82,800 unsold units as of end-June, according to Leechiu Property Consultants.

For Mr. Yu, developers should also diversify their portfolio across various real estate segments to ensure stronger take-up.

“Real estate is always cyclical… it’s not all down. People just move,” Mr. Yu said.

Property developers should further expand their portfolio beyond the Philippine capital amid the ongoing “shift to suburbia,” said Joey Roi H. Bondoc, director and head of research at Colliers Philippines.

“While there’s a slowdown in Metro Manila, developers should look into other growth areas,” he said in an interview.

Mr. Bondoc cited key expansion areas such as Region III (Central Luzon), Region IV-A (Calabarzon), Region VI (Western Visayas), Region VII (Central Visayas), Region X (Northern Mindanao), and Region XI (Davao Region).

These regions, along with Metro Manila, account for more than 90% of the country’s total residential units.

“So, this is where growth is likely to come from, given the slower take-up in the capital region,” he added.

Mr. Bondoc also recommended that property developers take advantage of the rising demand for lot-only projects.

“We’ve noticed that price growth for condominiums has slowed or corrected,” he said. “But if there’s one property segment where we still see capital or price appreciation, it’s the lot-only segment.”

According to Mr. Bondoc, investors typically favor lot-only developments with green, breathable spaces and access to nearby golf courses.

“Imagine buying an upscale luxury condo in Metro Manila at P400,000 to P500,000 per square meter… In comparison, a lot-only unit in Bulacan, Batangas, or Pampanga costs around P20,000 to P30,000 per square meter,” he said.

The take-up rate for lot-only units outside Metro Manila averaged 52% to 97%, according to Colliers data. The provinces of Batangas, Cavite, Laguna, Pampanga, Cebu, Davao, and Bulacan posted take-up rates above 90%, while Tarlac recorded the lowest at 52%.

“If there is one important piece of advice we can give, it’s to look into the lot-only projects being launched by major national developers outside Metro Manila, especially if you’re banking on price appreciation,” Mr. Bondoc said. — Beatriz Marie D. Cruz