Developers urged to tap short term lease market

Real estate developers with large inventories of ready-for-occupancy (RFO) units are urged to tap the short term lease market to avoid the deterioration of the project’s value, a property consultancy firm said.

In its first quarter 2017 property market report, Colliers International noted of an oversupply of studio and one-bedroom units in the Metro Manila market, caused by the aggressive

launching of these unit types over the past three to five years.

“For companies that have significant ready-for-occupancy units, Colliers believes that leasing out these units either individually or even as shared units makes sense, as long as the leasing schemes do not go against the market positioning of the properties and do not lead to a deterioration of the projects’ perceived value,” Colliers said.

At present, studio and onebedroom units account for about 70 percent of the Metro Manila residential market supply, according to the property consultancy firm.

Colliers deputy managing director Richard Raymundo said in a briefing about 20 to 25 percent of completed residential buildings remain unsold.

“In terms of inventory, when you look at the average of those that are finished already, they’re probably close to 75 percent sold to 80 percent sold.,” Raymundo said.

“So there’s this 20 percent that remains in the inventory—it’s still a problem for a developer particularly if it’s a big development,”he added.

To address this problem, Colliers suggests that developers offer their properties for short term lease, given the present demand in the said market.

Among factors driving demand for short term lease properties is the rise of both foreign and local tourists.

The property consultancy firm said about 60 percent of international visitors make a pit stop in Metro Manila before going to their respective destinations in the Philippines, while an average of 500,000 domestic tourists visit the country’s capital each year.

Colliers also mentioned the working millennial and OFWs on vacation as possible target markets for the short term lease market.

Moreover, Colliers cited the Century Properties Group as a developer that has already tapped the short term lease market, particularly with its Siglo Suites project, which helps owners effectively lease out units to short-,medium-, and longterm guests and tenants.

“The scheme also strengthens and enhances the security of owners and residents,” Colliers said.

Furthermore, the property consultancy firm recommends developers to offer RFO through rent-to-own schemes and be more aggressive in providing flexible and extended payment terms, to be able to entice more consumers to acquire these units.