Expected delays in completion has lowered new supply forecasts for the end of 2015, according to the latest Research and Forecast report from real estate firm Colliers International.
Only three projects in the major central business districts (CBDs) were completed during the third quarter, with two other projects sliding their delivery dates. The buildings that were completed were The Meranti at Two Serendra (800 units) in Fort Bonifacio and The Robinsons Land Sapphire Residences Tower 1 (410 units) and SM Shine Residences (712 units) in Ortigas Center.
No new residential developments are expected to be completed in Eastwood and Rockwell for the rest of 2015, while an additional 2,381 units are still expected next quarter in the major CBDs.
With an average of 7,466 units expected to be delivered annually from 2015 to 2019, the total expected inventory in the five major submarkets will amount to 100,622 units. About 93 percent of new supply introduced from 2015 to 2019 in the major CBDs will be located in Makati CBD, Fort Bonifacio and Ortigas – with Fort Bonifacio experiencing the highest new supply, delivering 19,150 units during the next four years
New residential supply puts upward pressure on vacancies
Despite the slowdown in deliveries, vacancies have been observed to increase across the board due to recent completions which are now entering the market, presumably after the owners have fit out their units.
Unlike the improvements seen in residential vacancies last quarter, a different story is unraveling in Makati CBD as the overall vacancy rate rose by 62 basis points (8.26 percent), with Grade ‘A’ property vacancies rising by 55 basis points to 4.4 percent.
Overall vacancies in Fort Bonifacio also increased by almost 1 percent, while Ortigas Center vacancies have returned to double-digit territory with a 10.1 percent vacancy level.
On the other hand, the lack of new completions has led to a further reduction in vacancy rates in Rockwell to around 3.7 percent overall.
Residential rents remain stable in 3Q 2015
An average rental growth rate of 1.5 percent was observed during the third quarter of 2015 for premium residential condominium property in the major CBDs. The average monthly rent for premium three-bedroom units in Makati CBD amounted to PHP 875 per sqm for the period, higher by 1.57 percent quarter-on-quarter; along with Fort Bonifacio which also increased by 1.26 percent quarter-on-quarter (PHP 882 per sqm).
Growth in rents was highest in Rockwell at 1.82 percent quarter-on-quarter (PHP 951 per sqm).
Should the completion of an unprecedented 13,400 additional units in the major CBDs by the end of 2016 materialise, Colliers foresees a downward correction in rental rates by as much as 5 percent by the end of 2016.
With an estimated 60,000 units being completed in the entire Metro Manila area by the end of 2015, plus another 51,000 units in 2016, leased condominium units in the fringe areas will compete with available units in the major CBDs. However, worsening traffic conditions have made renting residential units in the CBD a more practical proposition for employees during the weekdays; this phenomenon may soften the impact of a more competitive leasing environment amid elevated levels of condominium stock.
Capital values rose in line with rental growth during the third quarter, although growth for residential condominiums in the secondary market slowed slightly in all CBDs during the third quarter of 2015. Makati CBD condo values grew by 1.1 percent during the quarter, while Fort Bonifacio values grew similarly at 1.07 percent. On the other hand, Ortigas Center condo value growth was flat while Rockwell Center residential property growth was still the highest compared to the other major CBDs.
The growth rate slowed from almost 3 percent during the second quarter to a growth rate of 1.3 percent. Colliers said that should rental rates correct over the next 12 months due to the anticipated level of additional condo supply, a similar correction will be seen in capital values, leading to flat to slightly negative value growth.
To read to the full Colliers International Philippines Research and Forecast report click here.
