Fringe with benefits

The dearth of developable land in major business districts in Metro Manila has resulted in more aggressive residential development in the peripheral areas. Masterplanned communities, complemented by the completion of road projects, raised the attractiveness of condominium projects in the fringe areas.

Over the past 24 months, Colliers has observed strong take-up in Manila (North and South), Camanava (Caloocan-Malabon-Navotas-Valenzuela) and the Makati fringe, indicative of the growing appetite for condominium units in these up and coming locations.

Colliers recommends that developers continue acquiring developable parcels of land in the peripheries of central business hubs. Property firms must tailor their landbanking and development strategies to take advantage of the completion of new railways, subways, and the New Manila International Airport over the next 12 to 36 months.

Mortgage rates and remittances

Developers should closely observe factors that influence demand, such as changes in mortgage rates and major sources of remittances, which continue to partly fuel condominium demand in Metro Manila. Meanwhile, investors and end-users should closely monitor tweaks to payment schemes and discounts being offered by developers and how these compare to pre-COVID-19 terms.

Infrastructure

Metro Manila is a beneficiary of the national government’s infrastructure push, with the construction and rehabilitation of public projects such as railways and subways continuing beyond 2022. Improving connectivity, especially in the fringe locations, should provide an impetus for the development of more townships that feature vertical residential projects.

Recommendations

We encourage developers to highlight features and the overall viability of the living experience in their projects. These include landscape features, retail options and accessibility. Doing so will enable developers to capture demand from investors and end-users who are considering condominium units in the CBD fringe.

Developers should explore the fringe areas for new residential projects and monitor completions in submarkets with high vacancies. We recommend that developers reassess their development plans in submarkets with high vacancies, which tend to be driven by a substantial proportion of ready-for-occupancy (RFO) units.

At the same time, they should be on the look out for opportunities in fringe areas viable for new developments. From 2018 to 2021, we have seen aggressive launches and take-up in developable areas outside of major business hubs. Among the submarkets that have shown strong pre-sales include the Camanava corridor, Alabang-Las Piñas, and Manila North. These areas alone accounted for 82 percent of aggregate take-up for affordable-to-mid-income projects in 2021.

Developers should also look into further diversifying their projects. Most existing joint venture projects tend to be luxury projects, with an average total contract price (TCP) of P54 million per unit.

Colliers encourages developers to launch affordable and mid-income projects with TCPs ranging from P1.7 million to P6 million to capture the greater depth of this market segment. We recommend developing more affordable projects in the fringe areas, including the Northern part of Manila, Mandaluyong and Pasig. Meanwhile, mid-income units are more popular in Camanava and Alabang-Las Piñas.

We recommend that developers further validate the attractiveness of these areas for these price segments and test if the target markets are ready for higher-priced units.

Shift to fringe: Opportunities in the peripheries

Residential demand compelled developers to look for land in non-core locations, and, as a result, other business hubs in the country’s capital region emerged. Fringe areas in Makati, Mandaluyong, Manila South, and C-5 Pasig have become the newest battlefields for residential projects over the past few years.

Infrastructure to buoy demand

Colliers believes that the viability of Metro Manila fringe areas for residential investments will partly hinge on the implementation of big-ticket infrastructure projects, which are crucial in driving demand for and raising the viability of thriving communities.

At Colliers, we have been highlighting the importance of public projects such as roads, subways and railways in raising land and property values across the country. Among the public projects likely to support demand is the Metro Manila subway due to be completed in 2026.

Colliers Philippines is optimistic that the completion of infrastructure projects over the next three to six years will be crucial in reviving condominium demand postpandemic.

In our view, these projects will be particularly important in raising residential take up outside of core locations. This should result in further diversification of residential projects within Metro Manila.

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