Research & Forecast Report Philippines 2Q 2014
Real estate: key driver for slowerthan-expected economic growth The Philippine economy started at a slower pace, growing by 5.7% YoY in 1Q 2014. Real estate was identified as one of the top contributors in the quarter, expanding by 9.2%, while exports rebounded from its negative growth last year. While inflation increased by 110 basis points, domestic consumption remained to be buoyed by low interest rates and increasing OFW remittances. To establish momentum, the government plans on increasing public spending while adjusting key monetary policies to reach its target of 6.5 – 7.5% growth by year-end.
Office Five new buildings were completed in the period, all of which are located outside the Makati CBD. Close to 130,000 sq m of new office space are delivered, with more than 270,000 sq m slated for completion by year-end. The lack of new office space in Makati CBD benefits other locations, particularly Fort Bonifacio, as it is set to capture a significant share in the office supply in the next three years. Overall vacancy in the Makati CBD decreased due to the fast take-up of Zuellig Building and V Corporate Center. As a result, office rents in the area established its highest increase in the last four quarters.
Accelerating success.
Residential Two new projects were delivered in 2Q2014, amounting to 712 units. By end-2014, an additional 5,000 new units are expected for delivery, majority of which are located in the Makati CBD, Fort Bonifacio, and Ortigas Center. Residential vacancy in the Makati CBD eased in the period, decreasing by 50 basis points despite more unit owners deciding to offer units in the leasing market. Despite the relief, rental growth in the area remained stable.
Hotel & Leisure Close to 900 hotel rooms are completed in 1H2014 with about 22% of the forecasted 4,015 rooms slated for delivery by the end of 2014. More projects are expected to be delivered in the next three years with an average of 3,700 rooms annually. While Entertainment City is seen to capture a lion’s share of the supply, more international brands are expanding their presence in various locations within Metro Manila, particularly the cities of Taguig, Pasay, and Quezon. Despite the increase in supply, hotel occupancy remained flat in FY 2013. The situation thereby put pressure on hotel room rates.
Industrial Industrial supply slightly decreased in 1H2014, as some developers adjusted their land area applications with the Philippine Economic Zone Authority. Nonetheless, demand continued to be strong as vacancy rates in major industrial zones in Cavite, Laguna, and Batangas decreased significantly. Consequently, average land lease hold rates enjoyed a 21.4% increase while lease rates for warehouse and logistics facilities improved by 3.2%