BSP notes signs of price bubbles, oversupply in real estate sector

The Bangko Sentral ng Pilipinas (BSP) has noticed “limited signs of asset price bubbles” and “risk of an oversupply” in the real estate sector, according to its latest quarterly inflation report, which noted that inflation for all of last year settled at 4.4 percent.   “Real estate activity remained strong, reflecting growing demand from the offshoring and outsourcing sector,” the BSP said.   Data of the National Statistical Coordination Board (NSCB) confirm the industry’s strength. “Renting and Other Business Activities which includes Business Process Outsourcing (BPO) inched up by 11.8 percent from 10.9 percent,” the NSCB said in its Fourth Quarter 2011 update on the economy.   The latest Colliers International Philippine Property Market report said that demand “translates to roughly four to five million square meters of potential new office space” based on expectation of the Business Process Association of the Philippines’ Road Map 2011-2016.   A million square meters of that demand is expected to be available until the end of 2013 in Metro Manila with rental rates for Premium space seen to rise by 3.6% to P920 per square meters and is forecast to surpass the P1,000 per square meter mark in two to three years.   “Followed by the strong demand for BPO office space, Grade A and B rental rates are still expected to peak at a higher rate of 11% to P760 and P520 per sq m respectively by the third quarter of 2012,” Colliers International said.   “Some of the recently completed buildings include Kingston Tower (5,100 sq m) and Vector 2 (13,800 sq m) in Alabang, and iSquare (12,400 sq m) in Ortigas. In the Makati CBD, the Zuellig Tower, which is mainly intended for MNCs and CHQs, nears its completion with some 57,000 sq m of additional space in the first quarter of 2012,” the Colliers report added.   The property market study said “supply will remain constricted throughout next year as office development will remain muted until the completion of Alphaland Makati Tower (38,000 square meters) in 2013.”   Office space demand is particularly high in Makati “despite the narrowed options of available office space.”  The vacancy rate in “Premium” spaces was at 1.9 percent, then 4.66 percent in “Grade A” and 3 percent in “Grade B”   The Colliers International report said there were “high take-up rates manifested in Petron Megaplaza (3,800 sq m), Equitable Tower  (2,000 sq m), Pacific Star (1,900 sq m) and Enterprise Center (1,500 sq m).”   Vacancy rates in Makati are forecast to be within 2 to 3 percent for most of 2012. — ELR, GMA News