(Source: By Mary Ann LL. Reyes | The Philippine Star | June 21, 2015)
All signs are pointing upwards for practically all segments of the local property development sector.
According to the latest report from Pinnacle Real Estate Consulting, checking what the top real estate developers are doing is a good place to start if one is looking for bellwether or indicator of things to come.
The Ayala Land group, which has announced a target capital expenditure of P100 billion for this year alone, is keen on building township projects in 25 additional cities over three to five years, Pinnacle director for research and consulting Jojo Salas said.
We just have to look at Porac, a sleepy town, to see how the entry of a big name in the real estate industry can change the landscape as well as the lives of the local townsfolk.
Now that we’ve mentioned the Ayala group, I remember how pleasantly surprised I was to find out there is a new “tourist destination” in Tagaytay City – Ayala Malls Serin. In fact, it has now become a part of one’s itinerary when going to Tagaytay to visit Serin, which I have to admit, is a breath of fresh air.
Ayala is building Alviera in Porac, Pampanga, a 1,100-hectare large-scale masterplanned development that is being positioned as the premier business and leisure hub in Central Luzon, according to the Pinnacle report. Landowners in adjacent properties, I’ve heard, are scrambling to sell their property to Ayala Land, and that includes sugar lands, which is now a source of worry for Pampanga’s sugar mill, the Pasudeco Sugar Central because that would mean less sugarcanes to mill.
Anyway, not to be outdone, the SM Group will be building “micro cities” around its shopping malls by developing apartments, offices, and hotels. According to Pinnacle, 15 of the over 50 shopping malls are on land large enough for high density and mixed-used developments. The biggest bet, says the Pinnacle report, is on the planned Manila Bay reclamation of 600 hectares, and the group intends to pour in P100 billion of investments, that would turn the property into a masterplanned, integrated, and mixed use community.
Meanwhile, Megaworld, together with its subsidiaries, will launch five new townships, two of which will be in Luzon, two in Visayas, and one in Mindanao, with a total land area of around 400 hectares. Pinnacle says this will bring Megaworld’s total township land area to 3,100 hectares by yearend.
The township formula seems to be working. Pinnacle quoted the April release of the Bloomberg Asia Pacific Real Estate Index which revealed that SM Prime has gained 37 percent over last year, Megaworld by 30 percent, and Ayala Land by 29 percent. The Philippine Stock Exchange index grew by 24 percent during the same period.
Other top developers are also on the rampage. Robinsons Land has acquired an 18.5-hectare property along Ortigas Avenue Extension where it would build a major township. The Greenfield/Unilab Group is also developing the 12.8-hectare expansion of the EDSA Central complex into a mixed-use community, the Pinnacle report also revealed.
Meanwhile, the Vista Land group has been penetrating tertiary cities where other national brands are still contemplating on, and has been expanding its commercial retail investments, the report continued. By the way, the group, through Camella, is the first national brand to enter the province of Bataan, thanks to the fact that its patriarch, Manny Villar, is from Bataan. Camella now has three subdivisions in three towns of Bataan. It is also putting up a branch of All Home, the group’s one-stop shop for homebuilders.
And now, a snapshot of the various subsectors of the property sector.
According to Pinnacle, the office market will continue to experience robust demand from the business process outsourcing (BPO) sector. The continuous growth in this sector translates to additional office space demand across all major business districts. The overall vacancy rate of major business districts in Metro Manila is low at 4 percent.
As for the residential market, Pinnacle said demand continues to outpace supply. NEDA’s Statistical Research and Training Center estimates annual housing needs at over 800,000 per annum. Unfortunately, only close to half can afford to buy affordable housing units. Last year, the Housing and Land Use Regulatory Board approved licenses to sell for 216,503 residential units (which is actually the highest if we look at the figures since 2011). Inspite of all the construction activities we are seeing all around us, there is still not enough supply of housing units.
The retail, hotel and gaming, and industrial markets are also similarly optimistic.
The retail market continues to be dominated by SM, Robinsons, and Puregold, and this market has seen phenomenal growth in the convenience store platform, the report added. SM and its Indonesian partner last year announced they are opening a total of seven pilot Alfamart convenience stores to test its viability in the local market.
Meanwhile, the Robinsons group was targeting 500 Ministop stores by the end of last year, even as it plans 100 more stores this year.
The Ayala Group is not going to be outdone though. Its Family Mart has already breached the 100-mark outlets as of April this year and we have heard the group is also going into the supermarket business soon.
The Pinnacle report also revealed the Villar group is expanding its All Day Mart platform. In addition, it will be opening six to seven “All Home” stores annually over the next five years. The acknowledged leader in the one-stop shop for home needs business is, of course, the Wilcon Group, which now has 33 stores.
And then, of course, we have the mall developers who rent out the spaces to tenants. So Ayala Land builds Serin in Tagaytay and leases out store spaces to tenants. In exchange Ayala receives rent and/or percentage of gross sales.
The hotel and gaming market is also on the rise. The City of Dreams complex of the SM Group and Macau’s Lawrence Ho includes three hotel towers offering the brands: Nobu Hotel, Crown Towers, and Hyatt Hotel. The Ayala group has been ramping up its SEDA brand (there’s SEDA beside Ayala’s Abreeza Mall Davao, BGC, beside Centrio in Cagayan de Oro, Nuvali in Laguna, and in Atria in Iloilo) apart from its partnership with Intercontinental and Marriott Groups. Robinsons Land has also been expanding its GoHotels chain, while Federal Land/Metrobank Group has partnered with Hyatt Group.
The Pinnacle report pointed out what is equally interesting is the mushrooming of local hotel brands like Sogo and Nice Hotels, which cater to small travellers, and even international brands like Tune Hotel. Even Max’s Group, yes the restaurant, is developing a 60-room hotel called “Meranti” along Scout Tuazon in Quezon City.
The ripple effect of a boom in the property development sector on the domestic economy is huge.
“The first impacts are the jobs and spending that occur when the housing is constructed. Jobs created during this phase include the construction workers who are building the structure as well as the workers in the firms who support them, such as office managers, cost estimators, and accountants. The first layer of impact, the direct impact, includes the jobs described above as well as the total construction spending on the project itself. In addition to the direct economic impact of housing construction, there are also ripple effects which are of two types: indirect and induced. The indirect impacts are the jobs and spending created from businesses that are suppliers to the construction operations – those providing goods such as building material suppliers and cabinet manufacturers as well as businesses providing services such as architectural firms and trucking companies. The induced impacts result when the workers in the construction project spend their wages. This spending creates new jobs at the consumer-related businesses such restaurants, retail stores, etc. After construction, housing is occupied and further economic impacts occur. Even the local and national governments benefit from tax revenue generated during both the construction and residential phases.” (www.housingvirginia.org) These benefits do not include the unquantifiables: i.e. the revitalization of communities such as the one we are going to see in Porac, Pampanga as a result of Ayala’s Alviera project.