Sustained demand keeps real estate robust

THE REAL ESTATE sector remained strong in 2016 driven by sustained demand for residential properties and office space against the backdrop of a booming economy.

The real estate, renting and business sector continues to be one of the main growth drivers with gross value added reporting an 8.9% growth to P930.56 billion in 2016, higher than the 7.1% expansion it registered in 2015, and the services sector’s average growth of 7.4% in 2016.

For real estate sector alone, it grew by 6.9% to P222.03 billion from P207.70 billion in 2015, while that of business process outsourcing, renting, and other business activities grew by 14.7% to P417.84 billion, higher than 9.6% in 2015. Likewise, ownership of dwellings grew by 2.8% to P290.69 billion.

In its fourth quarter report, real estate consultancy firm Colliers International attributed the sector’s robust growth to three major drivers: influx of offshore gaming companies, continuous expansion of information technology and business process management (IT-BPM) firms, and tenants’ search for “flight-to-quality” opportunities.

A total of 676,000 square meters (sq. m.) of office space was taken-up in central business districts in the metro in 2016, up 7% compared to 2015.

“The market was still primarily driven by IT-BPM companies. Close to 60% of take-up across Metro Manila came from IT-BPM companies. Non-BPO companies comprised 32%, while the balance came from off-shore gaming companies,” Colliers said.

Colliers added that around 85,000 square meters worth of office space was occupied by offshore gaming companies in 2016, most of which came in the fourth quarter.

“The Philippine Amusement and Gaming Corp. (Pagcor) has launched POGO (Philippine Offshore Gaming Operators) late last year, initially setting 25 POGO licenses but with a potential to increase to 50 in the next six months,” Colliers International said in its forecast for the local property industry this year.

On the heels of his oath taking last year, President Rodrigo R. Duterte planned to put an end to online gambling in the country. This led Pagcor to stop renewing online gaming licenses and since then has relied on offshore gaming licenses as a new source of revenue.

“In the last quarter of 2016, there was a surge in inquiries from offshore gaming companies, each with a minimum requirement of 10,000 square meters taking BPO spaces,” said Colliers.

In its quarterly residential report, Colliers noted that pre-selling take-up of condominium units — an indicator for future growth — picked up after four straight years of decline, with total take-up for 2016 reaching 38,800 units.

Total licenses to sell issued by the Housing and Land Use Regulatory Board rose 15.2% to 473,210 units last year from 410,834 units in 2015, with middle- and high-end condominium units increasing 44.6% to 94,142 units from 65,104 units.

“Take-up has been strong across unit sizes as previous years’ launches are also sold,” Colliers said, citing the favorable interest rate environment.

On the flip side, the real estate services firm reported soft sales take-up in Metro Manila’s secondary residential market amid the influx of new supply across submarkets.

For 2016, take-up only amounted to 2,000 units, 70% lower than the take-up the previous year with Colliers saying that developments in “fringe locations” have become viable alternatives to projects in the central business districts (CBDs). Fringe area completions in 2016 reached 4,800 units, higher than the 3,900 in CBDs.

A separate report by property services and advisory firm CBRE Philippines, Inc. shared a similar view, saying that the southern part of Metro Manila now poses itself as an ideal location for residential, commercial, and office projects.

Furthermore, “uncertainties” in the current administration did not induce unfavorable sentiments among the players in the office sector, CBRE said, adding that foreign investors remain confident about the country’s BPO industry. — Ranier Olson R. Reusora