Megaworld sees rental segment driving growth

Tycoon Andrew Tan-led Megaworld Corp. is aiming for P20 billion in annual recurring income from its commercial, office and hotel portfolios by 2020, more than double the level posted in 2015.

Rental income is seen as a more resilient revenue stream in times of property downturns while earnings from residential development track economic upturns.  Most investors are more comfortable with property developers owning a big share of rental portfolio, considering this as a good hedge against volatility in property cycles.

In 2015, Megaworld’s rental income amounted to P9 billion.

In the next three years, Megaworld aims to complete about 1 million square meters of fresh property inventory that is expected to yield rental earnings, mostly from office, lifestyle malls and commercial space around its 22 townships and integrated lifestyle communities across the country. This is seen to bring the company’s total rental space to more than 2.5-million square meters by 2020.

“While we remain strong in our residential condominium business, it is also imperative for us to also fortify our rental portfolio. This direction will not only allow us to become a stronger and more sustainable company, but at the same time, we address the increasing demand for these spaces in our various townships,” Megaworld senior vice president Jericho Go said in a statement.

Of the total rental portfolio that Megaworld expects to build by 2020, about 1.5 million square meters will consist of office spaces across the country.

“By the end of this year, we will breach the one-million square meters of office space inventory as we continue to experience demand for office spaces,” said Go.

Megaworld has more than 130 companies in its office rental portfolio, occupying some 850,000 square meters, making it the biggest lessor of office space in the country.

The occupancy rate is also high at 99 percent. Pre-leasing rates of its soon-to-open office buildings stood at an average 80 percent, the company said.

“On the commercial side, as population in all of Megaworld townships is expected to also balloon to one million by 2020, we expect a tremendous growth in consumer spending especially on food, so we are prepared to address that,” Go said.

In the last two years, Megaworld opened seven new malls and commercial centers, namely Uptown Mall, Uptown Parade, Venice Grand Canal Mall, Twin Lakes Shopping Village, Festive Walk Parade, Burgos Park and Eight Forbes Town Road (both in Forbes Town), covering around 300,000 square meters of gross floor area.

This year, the company is expected to open new commercial and retail space at The Mactan Newtown, Iloilo Business Park, Southwoods City, Uptown Bonifacio, McKinley West, ArcoVia City and in some of its properties in Makati CBD, covering additional 200,000 square meters of gross floor area.

“While each of our townships has its own growing population, we have experienced influx of people visiting our townships because our lifestyle malls also become leisure attractions like the Venice Grand Canal,” said Kevin Tan, senior vice president and head of Megaworld Lifestyle Malls. —DORIS DUMLAO-ABADILLA