CBD fringes seen as new areas for growth

Fringe addresses may soon enjoy the so-called “post code envy,” as developers turn their sights to locations that previously went under the radar for residential developments.

This is what Colliers International Philippines reported as an emerging trend among residential spaces in Q4 2019 report it presented earlier this month.

“The launches, they are in the fringes,” said Joey Roi Bondoc, senior research manager at Colliers International Philippines. “You have here Manila, Parañaque and Pasig. These were the three locations that drove residential launches in Metro Manila for 2019.”

Areas in Quezon City, Las Pinas and Muntinlupa also join these rising fringe addresses, which refer to places outside the usual top locations and which are now enjoying spillover development in the form of residential projects.

“For Manila, Quezon City, Pasig, Parañaque, we now see a greater acceptance of condo living in these areas,” he added.

New dynamism

This new dynamism has been set in motion by the dearth of available land and the surging property prices in Metro Manila. However dire the contributing factors may be, the Colliers report titled, “Cycling into Headwinds,” categorizes this trend as a tailwind for the Philippine property sector.

Developers have to appreciate the burgeoning mid-income market as Bondoc noted that the takeup in mid-income offers —referring to condominium units priced between P3.2 million and P6 million—indicate the promise of the segment.

“If you compare takeup from 2019 and 2018, it appears that the mid-income is eating up the share of the affordable segment. It even expanded to 43 percent from only 39 percent in 2018,” Bondoc disclosed.

Developers can also benefit further by diversifying their products: “Colliers believes that residential buyers should explore projects in other areas where prices are lower and capital appreciation potential is greater.” The report further enumerated Ortigas Center and its fringes, Quezon City, downtown Manila, as well as Muntinlupa, Las Piñas and Parañaque. Another prospect is developable land in the northern and southern part of Metro Manila, as well as outside, such as Cavite, Laguna and Batangas.

This new interest in fringe locations and areas outside Metro Manila, alongside other factors that fuel demand, stand to benefit the property sector. These factors include capital appreciation and rental growth in Metro Manila, and increasing appreciation for co-living among students and workers.

General trends

For the fourth quarter of 2019, over 3,020 condo units went to the marketplace, higher than the 1,900 posted in the previous quarter. That raised the number of new units at the close of 2019 to 11,200 and the condominium stock overall to 130,090 units. Vacancy is stable at 11 percent for Metro Manila.

“Bulk of these [new units] were in Fort Bonifacio, and this is the third consecutive quarter that it led in terms of new condominium completion. But the Bay Area will re-emerge as your main residential hub in 2020,” said Bondoc. Of a projection of around 15,000 units in 2020, 80 percent will be in the Bay Area, a hub for offshore gaming. It is predicted to overtake Makati CBD in total residential supply.

Rockwell, Makati CBD and Fort Bonifacio—in that order—continue to dominate pricing for selling and rentals. Bondoc forecasts a continuing rise in prices across Metro Manila “driven by a Chinese offshore gaming demand.”

Health emergency

In relation to the novel coronavirus 2019 (COVID-19) health emergency, Bondoc said: “The question is, is the party ending soon? It remains to be seen how big the impact will be, depending on the length of time before the world solves or rides out the coronavirus. It’s not that the party is over. It’s that the party wound down a bit—at least for now.”

Considering that the influx of Chinese employed by the Philippine offshore gaming operators (POGO) generated the upticks in the property industry, the impacts of the travel ban on Chinese entering the country could dictate the future.

“In Makati, all buildings that have POGOs are fully leased and the nearby completed condos and preselling condos are fully leased or taken up. And as a result we saw an 11 percent increase in terms of lease rate as well as capital values or prices of condos,” said Bondoc. POGO also helped Ortigas and Quezon City.

The impact will be gleaned in vacancies. If there should be no takeup in the Bay Area for 2020, the vacancy for Metro Manila could go up to 18.8 percent—nearly eight points above the current vacancy.

Other headwinds include a low takeup of the upcoming supply of units and the POGO moratorium declared in Quezon City and Makati.