Property firms shift focus to keep afloat

PROPERTY firms are shifting focus, with mall developers reinventing themselves and housing construction scraping at the bottom, to keep afloat as the Philippine economy teeters into a recession.

Last week, the government said the country’s gross domestic product (GDP) grew at a sharply lower 0.4 percent in the first quarter from 3.9 percent in the same three-month period last year.

A proxy for economic output, GDP measures the goods and services produced in a country.

Last year, property companies as a group bested other listed firms, after the industry registered flat profit growth, as against the contraction in the five other sectors of the Philippine Stock Exchange (see story on this page).

In the first quarter this year, most real estate companies posted weak growth, with earnings among many firms still falling.

In its latest market overview, Colliers International said overall demand for property remains “weak,” adding high-end developments are likely to take the biggest hit with their buyers becoming more prudent and shelving plans to purchase.

“This is observed by some property developers that are refocusing their strategies to accommodate the mid- and lower-income markets,” the research firm said.

A number of projects are not selling as well as expected, and inquiries are a little bit less, Colliers said, adding it will be more difficult for projects to sell units this year with sluggish demand across all markets.

Danilo Ignacio, Eton president and chief operating officer, agreed, saying the company’s development projects for this year will see a strong bias for middle-income residential projects like the Belton Communities Inc. located in Laguna and in Fairview, Quezon City.

“Our focus really is more of low rise development. Until the economy fully recovered, we would rather be cautious [since] you are not sure if you can sell,” he said.

”There’s a huge demand for lower middle that’s why our emphasis now is Belton. We think that’s a strong market. It’s very affordable [at] only over P1 million. The amortization is only less than P10,000 a month,” he added.

Eton plans to construct 1,338 house and lots in Belton with a price range of P800,000 to P1.3 million for 80 to 130 square meters lots only and P2.4 million to P4.8 million for 50 to 100 square meters house and lot packages.

Lifestyle malls are in

On the commercial front, Colliers said more malls are reinventing themselves by incorporating leisure, entertainment, and personal services that will keep foot traffic afloat.

Colliers said non-traditional tenants like clinics now support mall operations, indicating a more complicated Filipino consumer.

“Lifestyle malls are in, and consumers fill up malls for different kinds of reasons already. This trend will be much more prominent in the next 6 months to 12 months toward the medium term—something that will keep retail space demand buoyant this year at least,” the research firm said.

Last week, SM Prime Holdings Inc. opened the Sky Garden, which will have 32 to 33 tenants such as cafes, diners, and coffee houses. The area offers free wireless Internet. It also has a concert venue called Sky Dome that can accommodate about 1,500 people.

The country’s biggest mall operator expects revenues to improve by 18 percent as foot traffic is seen to increase with the commercial operations of Sky Garden.

SM Prime spent P2 billion for the redevelopment of SM North Edsa, the biggest revenue contributor among its malls nationwide.

The company also plans to develop the 3-hectare parking lot in front of SM Megamall into a new building for stalls and parking spaces.

“Demand is expected to remain stable throughout the year despite generally weaker consumer spending. [V]acancies will remain low as malls incorporate other types of configuration,” Colliers said.

Besides usual refurbishments and maintenance, there will be not much retail mall construction activity this year, the research firm said, adding, “At most, neighborhood and pocket mall developments are expected. District and neighborhood malls are also still appearing to be bullish on this year’s prospects.”

At present, Metro Manila retail space supply stands at almost 4.9 million square meters of leasable space. First-quarter vacancy decreased to 11.2 percent from 13.6 percent in the fourth quarter.

Starting to recover

Ignacio said the industry is seeing a slight recovery this year compared with the fourth quarter of 2008.

“Starting 2009 we are seeing improvements on our sales as well as the whole industry,” he said.

The Eton executive said the company is “cautious” but “optimistic” this year due to improvement in sales in the first quarter.

“We will begin to show profits in 2009 as we start to recognize revenue from the sale of residential units. We will also begin to earn recurring lease from our office and commercial projects,” he said.

Ricardo Tan, Vista Land & Lifescapes, Inc. senior vice president for finance, agreed, saying the property sector is showing some signs of improvement.

“In the last two months we’ve seen a rebound in sales and we may accelerate project launches during the second quarter,” he said.  –Darwin G. Amojelar, Senior Reporter, Manila Times