Property firms urged to beef up land bankingBy Doris C. Dumlao
Philippine Daily Inquirer
Prospects remain bright for the property sector but there is a growing concern about the sustainability of revenue growth through future developments and availability of land, property consulting group CB Richard Ellis said.
In its latest market research, CBRE said most property developers continued to benefit from a strong market, adding that the industry had exhibited maturity, given the lessons learned from the Asian financial crisis of 1997.
But while market demand is not an issue, CBRE said property companies should continuously identify future growth opportunities and beef up their land inventories.
“Some property companies may not have taken into consideration the importance of accumulating raw land for future projects and were rather preoccupied with the development, sale and lease of their existing projects,” CBRE said in the report.
It said the second quarter was another “encouraging” period, with developers actively pursuing projects and more big-ticket residential, office, hospitality and retail developments. It said developers were also aggressively working on the acquisition of land that would be included in the ranks of active projects.
“Likewise, developers are keen on utilizing their existing land banks as the timing is very suitable for developments due to the favorable market conditions,” it said.
Property investments were still seen concentrated in the central business districts (CBDs) of Makati and Fort Bonifacio, although the report also noted that developments were becoming more active in the fringe areas. The report also cited increased development activities in the Bay area, Quezon City, Mandaluyong and Alabang.
Developments in the Bay area were noted to be mostly residential and retail, which complement the leisure and hospitality facilities of casinos. For Quezon City, Mandaluyong and Alabang, the report said the trend was toward pocket developments or new business districts.
Since developers were in a site-acquisition frenzy, the report noted that land values in major business districts had been rising, especially in Makati and Fort Bonifacio. Land transactions, however, were seen more active in Fort Bonifacio partly due to the availability of supply of areas for development.
“Rising foreign investment appetite in the country has been a boon to the real estate market as foreign funds are a huge source of project financing. The increasing interests of foreign investors are reflected on the substantial growth in foreign buying of shares of property companies in the local bourse,” the report said.
It noted a shortfall in the supply of office space, given the strong demand for business process outsourcing (BPO) offices. Starting 2011, vacancy rates in the five major business districts have never gone beyond 5 percent and in 2012 with the exception of Ortigas, the average occupancy rates of the business districts remained well above 96 percent. As a result, lease rates of offices have been continuously rising with rental increases being more pronounced in BPO buildings, the report said.
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