Ortigas strikes back
Several reasons continue to boost the strong demand for residential condominium projects in Ortigas Center and its fringe areas.
Primarily, the demand is driven by a greater acceptance for condominium living, rising disposable incomes of families from the eastern part of Metro Manila, redevelopment of office towers, as well as the implementation of major infrastructure projects likely to raise land and property values around the proposed subway stations.
The popularity of township development in Metro Manila has spilled over to the fringes of Ortigas CBD. Some integrated communities in the peripheries of the hub augment existing office, retail, and residential developments in the east.
Colliers believes, however, that with rising land values, dearth of developable land, and the continued construction of mid-income to luxury condominiums, developers differentiate their projects, incorporate upscale and innovative amenities, improve access to office towers and shopping centers, and feature outstanding concierge services. All these while making sure that investors are getting the yields and price appreciation rates that the developers committed.
Diverse drivers
Outsourcing and traditional businesses in the business district have been expanding, with mid-management to C-level executives of higher-value knowledge process outsourcing and shared service firms partly driving the demand for residential units in Ortigas and its peripheral areas.
For years, Ortigas Center has been ripe for redevelopment. Colliers expects the completion of new office buildings from 2019 to 2021 to significantly redefine the Ortigas skyline and boosting the business hub and its peripheries’ stature as a preferred commercial and residential address.
From 2019 to 2021, Ortigas Center will account for about 20 percent of the new office space to be completed. We see this office space redevelopment complementing the residential delivery in the business district.
Similar to the trend we are seeing for Metro Manila, office space demand in Ortigas Center remains diversified. Firms providing outsourcing, animation, insurance, engineering, and consultancy services have taken up space over the past 12 to 24 months. A robust office space absorption in the business hub should propel residential take up.
Complementing this is the influx of foreign tourists and foreign students.
Households from the Ortigas and other parts of Pasig and Rizal areas that are upgrading to condominium living are also driving residential take up in the business center and its fringe areas.
While Colliers has observed that end-user demand across the metro has been strong, a portion of these units are also being utilized as investments. With limited investment options in the local market, buying a condominium that will be leased out or resold in the future has become a highly viable option for Filipino and foreign investors.
Expanding base of buyers
Condominium projects in the Ortigas Center areas and its fringes have attracted a wide spectrum of investors and end users.
The base of residential buyers in the Ortigas area and its peripheries has also expanded over time, with developers launching condominium units classified under economic (P580,000 to P1.7 million ); upscale (P6 million to P8 million); and luxury (P8 million).
The total contract price per unit often ranges from P1.5 million to more than P30 million. Despite the increase in prices, average take up as of the third quarter this year stood at 90 percent, one of the strongest across the metro.
But how should the developers and investors maximize the area’s attractiveness as a commercial and residential hub? Colliers highlights here a few recommendations.
Highlight overall living experience
The lack of developable land and soaring prices in central business districts are driving more investors and end-users to consider condominium units on the CBD fringe.
To capture this rising demand, we encourage developers to highlight the overall living experience in their projects to be considered viable options. Developers should highlight quality of life, landscape features, retail options, and accessibility in their projects
Investors to consider potential for capital appreciation
Both end-users and investors should look at the capital appreciation potential of condominium projects that will likely be built near key infrastructure projects. Improved connectivity to be brought about by the Manila Subway and Bonifacio Global City (BGC)-Ortigas Link bridge that will pass through Ortigas Center will likely further raise residential lease rates and capital values in the area.
In fact, we see the Ortigas North and South stations of the proposed Manila Subway as potential areas for high-rise office and residential towers that should benefit from the ongoing redevelopment of Ortigas Center from 2019 to 2021.
In our opinion, the area around the North station is well suited for another mixed-use project that should feature high-end residential projects, while we see the development of more high-density projects near the Ortigas South station complementing the new office space that will be delivered in Ortigas Center over the next three years.
Mid-income sweet spot
Starting in 2016, Colliers recorded declining take-up for affordable units (P1.7 million to P3.2 million or $32,100 to $60,400 per unit) which we partly attribute to slower launches. But this is being offset by rising sales of mid- income (P3.2 million to P6 million or $60,400 to $113,200) projects.
We encourage developers to continue launching projects within the mid-income segment while shrewdly gauging the market’s capacity for more upscale and luxury (P6 million or $113,200 and above) projects over the next three years. In our opinion, residential prices are likely to further accelerate given the completion of new office towers in the area.
Colliers believes that the improvement in the profile of office tenants in the business hub should be complemented by the development of higher-priced condominium units.
Strategic joint ventures
Colliers further believes that local property developers should seize the opportunities provided by the growing popularity of joint venture residential projects across Metro Manila by firming up stronger partnerships with foreign real estate firms and launching upscale and luxury projects.
Ortigas Center has become a popular location for many joint venture projects among local and foreign developers. The foreign players are particularly enticed by attractive yields.
In our opinion, local players should highlight their partnerships with Japanese firms known for their technological innovations. Local developers should likewise emphasize the projects’ upscale amenities, integrated development, and potential for capital appreciation, which are all important to discerning buyers.
Target new business hubs
The expansion of offshore gaming operations from China has had a positive impact on Philippine property. Aside from offices, these firms look for condominium projects to house their employees, resulting in an acceleration of take up and prices in Makati CBD, Fort Bonifacio and the Bay Area.
We encourage developers to look for opportunities in business districts likely to house these firms, including Ortigas Center and its fringes.
