Still good times for residential sector

The residential property sector remains stable despite a ramped up supply, according to the third quarter report from real estate services provider Colliers International Philippines.

It said that a mix of demand from offshore gaming employees and local professionals is helping sustain the Metro Manila residential market. Local professionals and Chinese offshore gaming employees continue to drive demand in the secondary market. In the pre-selling market, about 42,000 units were taken up in the first nine months of the year.

The report noted that vacancy in the secondary market continues to drop despite an aggressive completion of new units in the third quarter of 2018. To seize opportunities in the sector, Colliers urged developers to pursue more projects in the peripheries of established business districts, tap the rising demand for worker housing, tie up with the government for the skills upgrading of construction workers, push for the entry of 100 percent foreign-owned contractors, and be more flexible to the residential demand of offshore gaming operators.

It pointed out that demand for worker dormitories remains underserved and proposed that developers scout for properties in the peripheries of central business districts where worker housing dormitories could be established, such as in the fringes of Fort Bonifacio, Makati, and Ortigas.

Colliers, in its report, also said that the expansion of offshore gaming operators in Metro Manila results in a greater demand for residential complements. It recommended that developers showed be quick in tweaking development plans so as to immediately capture the needs of offshore gaming companies that continue to influence Manila’s property developments. Projects initially intended for hotels or malls, for instance, could be redeveloped into residential projects that should support offshore gaming operations in adjacent office towers, it asaid.

Meanwhile, Colliers observed that a number of developers are hard-pressed to complete their projects as scheduled due to manpower constraints. To bridge the labor supply gap, it recommended that stakeholders aggressively push for the exclusion of 100 percent-owned foreign contractors from the foreign investment negative list (FINL). The FINL specifies the investment areas restricted to foreigners.

The report said that according to the National Economic and Development Authority, 100 percent foreign-owned contractors will be allowed to take part in the construction of public projects under the government’s Build Build Build program so this should help ease pressure on local developers facing construction delays.

Colliers, in its latest report, revealed that as of the third quarter of 2018, there were 113,700 completed condominium units across Metro Manila’s secondary residential market, which covers major business districts.

By 2021, Colliers projects Metro Manila’s secondary residential stock to reach 142,000 units, about 33 percent higher compared to 2017. Colliers believes that ramped up completion of new condominium units is partly attributable to the relentless demand from offshore gaming firms from China. The report said that Fort Bonifacio, Bay Area, and Makati CBD are the three major locations that have been cornering bulk of offshore gaming space transactions. This strong demand is spilling over to the residential sector as aside from expansive office space, a major requirement of these offshore gaming companies is a residential complement, it noted.

Colliers said it sees the delivery of at least 9,600 new units in 2018, although this will drop to about 8,300 new units annually from 2019 to 2021.

By end 2018, the report expects average lease rates growing by only between 0.6 to one percent. From 2019 to 2021, lease rates will grow by only 0.3 to 0.4 percent per annum due to delivery of more units into the secondary market.

Colliers estimates 2018 vacancy to be at the lower end of its 11 to 12 percent forecast. From 2019 to 2021, it projects vacancy to be about 11 percent annually.

Undue haste criticized

Not everyone seems to be happy about the recent refusal by the House of Representatives to renew the electricity distribution franchise for Iloilo of Panay Electric Co. (PECO).

There are those who are saying that despite PECO’s compliance with the House franchise committee’s requirements for its franchise renewal, including endorsements from customers, the Energy Regulatory Commission, and the National Electrification Administration, committee chair and Palawan Rep. Josef Alvarez threw out the electric utility’s bid for renewal of its franchise to supply electricity to Iloilo City and three adjacent towns.

They said that the Alvarez-led committee took up on Aug. 22 House Bill 8132 which proposes to grant to another company, namely More Minerals Corporation, the franchise to distribute electric power to end users in Iloilo City, but then, hearings for MORE’s bid for a takeover of PECO assets were kept under wraps.

Critics noted that the three-day prior notice requirement for the hearing of More’s bid was posted on the Congress website only on the night before the intended date of hearing and that no invitations for the hearings were sent to Iloilo customers and stakeholders, or even to PECO. In short, there were no public hearings at all that would allow affected parties to contest or protest, they said.

They also cited reports from insiders who said that during the Sept. 26 Hearing, More senior officials admitted that it did not have any existing assets, facilities, equipment and skilled employees to be used in the electric power distribution business. 

Furthermore, the company did not have a comprehensive year-to-year roll-out plan that can be scrutinized by the public and Congress. The officers of More simply relied on their “anticipated” grant by Congress of the power of eminent domain, or the congressional power to expropriate or seize the assets and business of the 95-year service provider PECO in favor of More, they said.

They revealed that four lawmakers present during the hearing vigorously opposed More’s bid because of breaches of process and cause for wholesale graft, due to lack of prior three-day notice, lack of notice and invitation to stakeholders during the public hearings, the use of the power of expropriation, among others.

It was also pointed out that More failed to show that it owned and possessed the necessary capital and technical expertise to operate as an electric power distributor, with its paid-up capital only at P2.5 million as of the date of filing of its application for a new franchise on July 22, 2018.

They also criticized the Senate Committee on Public Services, chaired by Sen. Grace Poe, for approving in principle the grant of a 25-year legislative franchise to More and a transition period to allow PECO to temporarily operate to prevent power outages.

PECO’s franchise is scheduled to expire in January next year.

The Private Electric Power Operators Association (PEPOA) had earlier opposed More’s entry, saying that the latter is primarily a mining company, hence, does not have the technical capability to operate and maintain a power distribution utility.

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