Residential developments
AFTER FOUR consecutive years of decline, pre- selling take- up of condominium units bounced back, reaching roughly 38,800 units in 2016, Colliers International Philippines, a real estate services firm, reported.
“Take- up has been strong across unit sizes as previous years’ launches are also sold,” the firm said in its fourthquarter residential report. This performance was attributable to a favorable interest rate environment, which still encourages buyers to acquire condominium units.
A not-so-good-news was that in the secondary residential market of Metro Manila take-up was soft amid the influx of new supply across submarkets. Take-up in 2016 only amounted to 2,000 units, which, the firm pointed out, was 70% lower than the takeup in the previous year.
“Developments in fringe locations have become a viable alternative to the expensive projects in the CBDs [central business districts]. Fringe area completions in 2016 reached 4,800 units, higher than CBD’s 3,900 units,” Colliers said.
Among the key completions in 2016 that the firm mentioned were the Eton Tower (786 units) in the Makati CBD and Park West (713 units) in Fort Bonifacio.
Overall vacancy in Metro Manila stood at 10% in 2016, up 2.2 percentage points from 2015. This might go higher, hovering between 12% and 16% in the next twelve months, due to the delivery of additional 22,800 condominium units, barring delays.
Vacancies in Makati CBD and Fort Bonifacio might increase to around 16% and 14% respectively as new units get added. The latter CBD is seen to cover half of the projected new supply in 2017. Meanwhile, Ortigas Center will likely have a vacancy rate between 7% to 9% in the next twelve months.
Rental rates for the premium three-bedroom units in Makati CBD declined 1.4% to P837 per square meter a month. Rental rates in Fort Bonifacio slid 1.5% from P848 per square meter a month to P833, while rents in Rockwell fell 1.3% to P930 per square meter a month.
Colliers predicts that rents in major CBDs will decline between 2% and 6% over the next twelve months due to slow absorption and delivery of new units in the fringes.
Developments in fringe areas, which are offering discounts of up to 15%, are becoming a viable alternative to expansive projects in established business districts.
“The units in the fringes serve as halfway houses for millennials and other professionals who opt to live near their place of work during weekdays but go home to their families during weekends,” the firm explained.
“These weekday halfway houses are also more practical for employees working in CBDs as the worsening traffic in Metro Manila only makes their commute to and from work more unbearable.”
Given the declining occupancies in the secondary residential market, it might be wise for developers to follow Colliers’ recommendation to differentiate their projects and cater to particular clientele.
They may tap into the worker-accommodation segment as the young workforce seek affordable studio or one- bedroom units, target expatriates with preference for larger two- and threebedroom units within CBDs or establish their own leasing terms to market to particular clients.
“Given the falling occupancy rates in CBDs, it would [ be] practical for developers with projects under construction within and outside the established business districts to organize their own leasing arms in order to assist their buyers to lease out their units and attain the promised yield,” Colliers said.