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What to expect in 2008(Philippine Daily Inquirer Via Thomson Dialog NewsEdge) (Conclusion) DESPITE THE BOOM IN property developments in 2007, there have been obstacles, or what Global Property Guide calls alarming signs, that would tend to weigh down the property sector: The boom is actually limited to new developments and condominiums. Several potential buyers are still wary of problems associated with fraudulent titles. High transaction costs and the lack of information also hamper the real estate market. Prince Christian Cruz, senior economist of www.globalpropertyguide.com, added that condominiums and new subdivisions are generally free of these concerns; hence, they benefit more from the boom. Emerging markets Richard Raymundo, director for Research & Consultancy, Colliers International, predicts what 2008 holds for the office, high-rise residential and hotel and leisure sectors. The office sector will still be the banner sector for 2008. Rents will continue to post strong growth as they ride on the back of a strong demand from the BPO segment, with suppliers scurrying to keep up. In 2007, rents went up by as much as 26 percent. Rents in the best buildings in the Makati CBD have breached the P1,000-per-square-meter-per-month mark. This increase comes on top of a 30 percent rent hike in 2006. Rents could increase by as much as 15 percent in 2008. Strong demand will still come from the BPO (which include call centers) segment. Industry analysts predict that the BPO segment would need 1.85 million sq m of office space from 2008 to 2010. However, the announced supply has only been 1.58 million. This is broken down to 634,000 sq m under construction and 945,000 sq m on the drawing boards. If the planned developments do not push through, the supply would remain tight, Raymundo assesses. Vacancy in all districts is at single digit levels, while there is not much new supply to be added in 2008. Makati CBD. End 2007 vacancy is at 3 percent. Only 60,000 sq m of space will be complete in 2008. Office vacancy will remain below 5 percent throughout 2008. Ortigas Center. End 2007 vacancy is at 4 percent. Only 20,000 sq m of office space is being constructed for completion in 2008. As with Makati CBD vacancy rates, Ortigas CBD vacancies will remain below 5 percent throughout 2008. Fort Bonifacio. The fastest growing area in the country right now has also been benefiting from the office spillovers of Makati CBD. End 2007 vacancy here stands at 10 percent. Space for completion in 2008 is estimated at 200,000 sq m. While this may seem a lot, a number of projects are already getting precommitments for leasing space. High-rise residential condominiums posted strong sales 2007. High-rise residential living is now broader, targeting middle-income (starting prices of P1.25 million per unit) to the high-end (in excess of P15 million per unit) segment. Some trends in this sector are: Accessibility is a key factor, particularly for middle-income segment. Thus, expect more of these kinds of development along the Edsa corridor. Heavily themed projects are in, given the increased competitiveness. There are new developers in the market who are even getting good presales take-ups, Raymundo observes. The year 2007 witnessed new concepts such as Z-lofts, themed cluster developments, interesting pocket gardens and sole amenity floors. Expect to see more of these coming out in 2008. Level of facilities and amenities would be taken a notch higher to differentiate projects. This will be seen in the high-end segment wherein the level of facility and amenity will justify the price premiums. Price premiums would be based on proximity to retail centers, schools, business districts and transportation hubs. High-end developers will test the P110,000 per sq m price level. This is marketable for projects launched in prime locations, and having excellent amenities. Expect the emergence of cluster residential condominiums executed as an enclave. This would highlight the sense of exclusivity and privacya luxury in congested urban centersto select buyers. Based on selling prices that increased 10 percent in 2007, expect an additional 10 percent increase in 2008. Some locations, though, may find it harder to impose price increases due to relatively larger supplies. An example of this would be Fort Bonifacio. Currently, nearly 7,000 units are being sold and constructed here from 2008 to 2011. Trends Hotels and leisure developments will figure more prominently in 2008. Some trends: Leisure is catering to a broader market. So leisure lots are now being offered in smaller cuts and more affordable total contract prices such as Playa Calatagan. There are now also condominium projects that make it more affordable and easier to maintain. Examples of these are Hamilo Coast, Terrazas de Punta Fuego and Alta Vista in Boracay. More leisure concepts are being launched. Boutique hotels will be more prominent. These are hotel developments with less than 30 rooms but are high on style and amenities. The announcement of more hotels (Raffles and Fairmont in Ayala Center) in the Makati CBD will be a welcome relief. The year 2007 saw frustrated travelers finding it hard to book hotel rooms in the Makati CBD. The high occupancy rates in the Makati CBD and increasing tariff rates (the $150-$200 effective rate is now being achieved) have led to spillover demand to other locations such as the Bay Area in Manila. Fort Bonifacio will likewise host more hotels to augment the tight supply in the Makati CBD. Shangri-La is the most prominent, having acquired a 1.5-hectare property in the former military base. Emerging markets Santos said investment in the Asian real estate industry has historically been concentrated in mature markets such as Tokyo, Singapore, Hong Kong, and fast-growing cities in China. The downward pressure on returns in these mature markets and excess liquidity in capital markets is encouraging investors to look seriously at emerging markets in Southeast Asia, resulting in a steady advance in investments there. The Philippines, in particular, is slowly growing in terms of investment as a result of the huge demand for offshore services, Santos said. And that growth is accelerating, Rick Santos, CB Richard Ellis Philippines chair, said in a statement. Santos added that another factor influencing the Philippine real estate sector is an increase in the number of initial public offerings (IPO) by real estate developers. From 2004 to 2007, 21 firms went public, seven in 2007. Also in 2007, three other real estate companiesAnchor Land Holdings, Vista Land and Lifescapes and Eton Properties Philippinesannounced plans for IPOs. Funds generated by the IPOs are expected to be invested in new projects. As a result of these recent developments, global insurance conglomerate ING has placed the Philippines in the top three investment sites among emerging markets in 2007, Santos said. Foreign property investment in the residential market has experienced robust growth, partly as the result of an influx of Korean investors into the country. Koreas Hanjin Heavy Industries and Construction Corp. invested $13.7 million for a high-rise residential development in Fort Bonifacio, Santos said. Increasingly, we see a variety of Philippine projects being sold in key overseas markets including California, the US East Coast, Dubai and Hong Kong, Santos said, which will also contribute meaningfully to growth in Philippine real estate. Copyright 2007 INQ7 Interactive Inc, Source: The Financial Times Limited |