Builders pressed on HLURB compliance

THE COUNTRY’S leading organization of socialized and low-cost housing developers recently called on its members and other developers involved in the efforts to provide decent mass housing to submit not later than March 31, 2014 an inventory list of their unconstructed socialized housing components for these to be credited in their socialized housing compliance.

Pursuant to the directives of Housing and Land Use Regulatory Board (HLURB), the Organization of Socialized Housing Developers of the Philippines, Inc. (OSHDP) led by its President, Lawyer Christopher Ryan T. Tan, OSHDP made the call following the recent issuance of HLURB Memo Cir. 19, series of 2013.
The circular requires developers of socialized housing projects to submit to the HLURB Regional Field Office, where the housing project is registered or located, a written declaration on these constructed housing components.

Otherwise, these may no longer be used or credited in the developers’ compliance with the Balance Housing requirement under Section 18 of R.A. 7279, the Urban Development and Housing Act of 1992.
Under this rule all housing subdivision developers shall build an equivalent of 20% of the total units or of the cost of the development into socialized housing to cater to the needs of the homeless underprivileged, Atty. Tan explained.

For his part, Engr. Jefferson S. Bongat, OSHDP chairman, mentioned that the HLURB Circular applies to the following cases:

a) Utilization of the unconstructed housing components of the socialized housing projects after the issuance of their license to sell through joint venture with developers of main subdivision projects; and
b) Utilization of unconstructed housing components of socialized housing projects which were devolved as advance compliance for future main subdivision projects of the same developers.

source:  Manila Standard

CBRE: PH industrial property market surged in 3rd quarter

THE INDUSTRIAL property market “was slow-moving for quite some time and now it has been picking up pace.”

Leading real estate advisory and services firm CB Richard Ellis Philippines (CBRE) disclosed this current scenario for the country’s industrial and manufacturing sector in its 3rd quarter market review.
The rise in manufacturing activity has led to increasing demand in leasing industrial real estate properties.
In 2013, warehouse transactions showed a typical area range of 3,000 square meters to 10,000 square meters with lease terms from 1 to 5 years while manufacturing leasing transactions showed a typical area of 5 to 10 hectares with lease terms ranging from 15 to 25 years.

“The manufacturing sector of the country is generating renewed interest globally and is proving to be a re-emerging growth industry. CBRE added.

Manufacturing is a capital intensive industry requiring massive tracts of land which is the primary reason for the long lease terms. Industrial property transactions at these scales are expected to translate into future expansions and fuel overall manufacturing growth.

During the second quarter of 2013, manufacturing yielded the second highest growth of all economic sectors with a 10.3% year-on-year growth rate and 9.7% on the third quarter.

This positive growth has been a result of expansion of firms to the country and increased production volume from heightened global demand.

“Multiple agencies of the government have recognized the importance of the industry for long-term economic growth and are collaborating with the private sector to increase the expansion of manufacturing and industrial firms to the country”. CBRE said.

Volume of production index in September grew by 16% year-on-year with chemical products and furniture & fixtures topping the list.

Freeport zones Clark and Subic and the CALABARZON region are the major manufacturing hubs of the Philippines. These are strategically located in the fringes of Metro Manila with nearby seaports and airports for easier access to transport goods domestically and globally.

One of the main concerns of firms expansion are costs, indeed the Philippines posts relatively higher electricity costs compared to our neighboring countries. However, as per any country, each has its own strengths and handicaps.

Although the country lags behind power costs, it is globally competitive in industrial land values and has a definitive advantage in quality labor pool. The Philippines has the lowest median age in the region of 23.4 with labor productivity on the uptrend. Specifically for manufacturing, labor productivity grew by 3.84% and 4.46% in 2011 and 2012, respectively

Japanese and Korean Firms have shown recent interest on investing in the country’s manufacturing and infrastructure sectors.

Companies such as Canon, Brother, Murata, Bandai, Fujifilm and Cemedine have alreadyannounced their manufacturing-related investments in the country.

The Philippines is a globally competitive manufacturing hub for its strategic location, strong macroeconomic fundamentals, favorable demographics and cost effectiveness.

Other highlights of the latest Metro Manila Market review of CBRE includes:

• Expanding Office Market Show Strong Performance
Nearly 500,000 sqm of office space is expected to enter the market in 2013, of which 45% have come online in the third quarter.

• Residential Developers Continue To Tap Bond Markets
As domestic liquidity presents growth prospects for the economy, capital markets have been tapped in developing residential projects.

• Investments Unfold in the Third Quarter
In recent years, however, the economy is rerouting towards becoming more investment-led and industrialized.

• Upcoming Holidays Spike Up Global- Local Retail Partnerships
Joint agreements between local businesses and global brands continue to expand in the retail market as the holiday season draws near.

source: Manila Standard

Watch this space

At the start of the year, property consultancy firm CBRE Philippines said in its annual market outlook that the Philippine real estate industry will have bright prospects throughout 2013.


Sustained growth was projected for the residential, gaming, leisure and business process outsourcing (BPO) or office sectors due to strong investor confidence arising from good macroeconomic factors and low interest rates.

True enough, the local property sector has continued to grow this year. Claro Cordero, Jones Lang LaSalle Philippines' research, consulting, and valuation head, gave an overview of the property industry's performance.

"The local property sector sustained its positive performance in 2013, supported by the continued growth of the major property demand drivers---that is, the offshoring & outsourcing (O&O) and BPO industry for the office or commercial sub-sector; the remittances from overseas Filipinos for residential and retail sub-sectors; and continued interest and potential on tourism for the hotel sub-sector," he said in an email to BusinessWorld.

A healthy economy, growing domestic consumption, and a sustained inflow of remittances---which, according to Mr. Cordero, encouraged more international retailers to set up shop in the Philippines---buoyed the retail property sector.

"The sustained demand has supported the moderate growth of rents in retail mall developments," he said. "In 2014, new malls and retail expansions are expected to complete, considerably adding to the current retail stock."

The hotel industry, anticipating increased tourist arrivals because of the Philippines' renewed tourism campaign, continued to start and develop more projects. Mr. Cordero expects the Metro Manila hotel supply, in particular, to "increase even further" in the next several years.

"The majority of the upcoming hotel accommodations will be located in the Entertainment City within Bay City," he said. "There are also a number of hotels coming on stream in the established business districts of Makati, Ortigas and Bonifacio Global City (BGC)."

Aside from a steady flow of remittances, a relatively low-interest rate environment and flexible financing schemes helped the residential condominium market's performance, according to Mr. Cordero. "In the next few years, residential condominium supply is expected to further rise, potentially doubling the current stock in Metro Manila by 2016."

FOREIGN FORCE

More investors and expatriates were also encouraged to establish offices in the Philippines, which then increased the demand for high-end apartments in premium residential areas near and within the central business districts.

In an email to BusinessWorld earlier this year, CBRE Philippines explained how foreign expatriates contributed to the increased demand for high-end residential condominiums.

Initially, expatriates in the country were limited to renting, but with the rapid appreciation of values for luxury developments---particularly residential condominiums---it has become more cost-effective for longer-staying expats to buy these units to live in, and eventually, for investment. The Philippines allows foreign expats to own up to a maximum of 40% of the property's entire sellable floor area.

They also explained that more restrictive realty laws in neighboring Asian countries have made the Philippines a more attractive destination for foreign expats.

In Hong Kong, the government's imposition of higher rates on stamped duty taxes---an effort to control the properties' rapidly increasing prices---have stymied investments in residential units. Meanwhile, in Singapore, banks have imposed a lower loan-to-value ratio top of higher rates on stamped duty taxes, forcing potential buyers to cough up a larger outlay for acquisition of properties through financing.

This has led investors to look for properties elsewhere, and the Philippines, which gained investment-grade ratings from Fitch Ratings, Standard & Poor's, and Moody's this year, has become one of the more feasible options.

Julius Guevara, associate director for valuation and advisory services at commercial real estate consultancy firm Colliers International, believes the demand for high-end real estate coming from expats in the Philippines is "only being addressed."

This market has traditionally driven the high-end market, he explained, especially in central business districts. Because of an expanding economy, the growing BPO sector, and bleaker prospects abroad, foreigners have been flocking to the Philippines, increasing the demand for high-quality dwelling space.

According to him, rental growth in posh villages such as Forbes Park has been escalating steadily since lack of land prevents new exclusive subdivisions from being built near the central business districts. While there has been a strong demand for condominiums in the past few years, these projects were mostly focused on studio-type to one-bedroom units. The demand coming from foreign expatriates is for larger units.

"Luxury condo development has been growing the past couple of years, but we will see their completion in another four to give years," he said in an email earlier this year. "As of now, there will still be some unmet demand for this segment; this is reflected in the low vacancy rates in premium properties in Makati, Rockwell and Bonifacio Global City."

OUTLOOK ON OFFICES

The growing O&O industry, said Mr. Cordero, contributed to the resiliency of rental rates in the commercial office property sector.

"The healthy demand for office space has buoyed the moderate growth of rents and capital values of Grade A office space," he said. "Consequently, property developers were encouraged to launch new office projects in different districts in Metro Manila, further increasing the level of upcoming office supply in the next few years."

At a press briefing held last month, Joe Curran, general manager of commercial real estate services firm Cushman & Wakefield's (C&W) local arm, also noted that office spaces have fared well in driving growth in the local property sector.

According to C&W research, Manila has posted a highly competitive vacancy rate of 4.3% as of the third quarter this year, and it remains one of the locations with the lowest vacancy rates in Asia-Pacific's emerging markets. It has also outperformed the rest of the countries in the Asia-Pacific region in terms of net absorption, which totaled to an estimated 482,126 square meters, with new supply of 332,786 square meters coming in during the same period.

Manila also ranked above markets such as Mumbai and Bangalore in India, mostly due to the healthy demand driven by the IT-BPO sector.

"This means companies are continuously increasing their head counts, and they are expanding not only in Metro Manila but in other cities in the Philippines as well," said Mr. Curran at the event.

In real estate, vacancy rate is the percentage of all available units in a rental property that are unoccupied at a particular time. This means low vacancy rates denote strong rental sales, while high vacancy rates indicate weak rental sales. Absorption rate, on the other hand, is the rate at which available units are sold in a specific real estate market during a certain period of time. A high absorption rate, therefore, suggests a rapidly shrinking supply of available units.

Taguig and Makati have witnessed 59% and 29% of the absorption, respectively, with Makati posting the lowest vacancy rates and highest year-on-year change of 11% in terms of weighted average rental values. C&W said that incoming office supply over the next two years is estimated at 1.2 million square meters in key areas around Metro Manila, with BGC accounting for 42% of new supply.

"The Fort is continuously being a top player in the office space sector, attracting both outsourcing and non-outsourcing firms," said Mr. Curran.

The performance of Metro Manila's office sector, compared with that of other cities in the region, is a testament to how strong the market is today, added Mr. Curran.

C&W expects that in the next three to five years, "green" buildings will become more ingrained in the industry. The Philippines will also enter a "tenant's market" phase since investors will be inclined to buy strata-titled office spaces, which allow for several unit owners across a single property.

Completions are expected to be thin in the first half of 2014, said Mr. Curran, as developers are set to complete projects only by the end of the year, perhaps well into 2015 and 2016. While C&W expects this to put pressure on prices and vacancy, the stable growth of the BPO industry will continue to fuel office space expansion in key locations in the country.

SOARING, BUT SOBER

Last November, Bangko Sentral ng Pilipinas governor Amando Tetangco, Jr., to quell worries about a possible real estate bubble in the country, explained that current real estate activity translates to presence of demand.

"Property developers don’t build if they don’t think there’s demand," he said in a previous BusinessWorld interview. "They have changed their business model. Pre-Asian crisis, if they are building a four-tower development, they build at the same time. Now, it’s one tower at a time."

Despite, or perhaps even because of, the optimism about the property industry, Mr. Cordero still cautions against overzealous building.

"Developers should be able to read market signals by undertaking thorough studies and analyses, to know when excessive building may actually not work in their interest to protect market values," he said. "Well-paced building and development plans can contribute to sustainable and lasting market growth."

source:  Businessworld