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Cebu construction bounces

Booming. The construction of a hotel in Mandaue City is in full swing. After a sharp decline last year, bringing down Central Visayas’ gross regional domestic product to just 4.8 percent, the construction industry bounced back from the slump, with first semester figures showing growth of 14.7 percent. Stakeholders are confident that with the Duterte administration’s plans to steo up infrastructure spending, prospects for the construction and real estate industry will be even brighter. (Sun.Star file)

CEBU’s construction and real estate industry operated in positive territory in 2016 and prospects for higher government infrastructure spending is expected to drive market confidence next year. Preliminary data from the National Economic and Development Authority (Neda) 7, sourced from the Philippine Statistics Authority (PSA), show a triple-digit growth in construction activities, based on approved building permits in Cebu. In terms of volume, Neda 7 Director Efren Carreon showed a 108-percent growth from January to June while construction value grew by 69.3 percent during the same period. Unlike in 2015, when construction pulled down the Central Visayas’ economy–bringing the region’s gross regional domestic product (GRDP) growth to only 4.8 percent from the 7.8 percent in 2014–the region’s construction industry is expected to soar in 2016, Carreon said, basing his projections on the first semester figures. “This (first semester construction data) will be factored in the 2016 GRDP. I think construction will recover,” Carreon stressed. The decline in the 2015 GRDP was mainly due to the construction subsector, which suffered a reversal, from a growth of 14.7 percent in 2014 to a decline of 14.7 percent. Still, majority of construction activities in the region are located in Cebu, although Bohol saw a triple-digit growth at 107.2 percent, while Siquijor grew by 20 percent. Data for Negros Oriental was not included in the report, as this formed part of the Negros Island Region. The Housing and Land Use Regulatory Board (HLURB) in Central Visayas earlier reported P16 billion worth of residential projects that were granted a license to sell from January to Dec. 2. “The industry performed very well this year and we expect this to continue next year. I don’t see this as a plateau in the short-term because as Cebu’s economy grows, real estate goes up,” said HLURB 7 and 8 officer-in-charge Francis Ordeniza. Pinnacle Real Estate Consulting Services, in its 2016 Maturing Cebu Property Market Report, described Cebu as a “very developed” market that has “reached its maturity.” In terms of office spaces, Cebu had close to 900,000 square meters of Grade A office spaces by the end of 2016. This is a growth of about 50 growth in the past four years, or an average annual growth of 12 percent. From 2009 to 2013, the average growth was 15 percent. While the growth is slightly slower, it reflects the maturing market and the Philippine office market in general, said Pinnacle. The residential market in Cebu also showed phenomenal growth in the past four years. Currently, Cebu has some 22,284 condominium units, representing a 148-percent growth from about 9,026 units in 2013. In a “couple of years”, Pinnacle said an average of 5,000 residential units will be delivered to the local market. The retail market typically composed of mall spaces, and in recent years, commercial spaces in office and residential buildings, saw robust performance. Total commercial-retail spaces is estimated at 1,080,000 square meters due to the steady completion of the sprawling SM Seaside Cebu. This is a 98-percent jump from the estimated 545,000 sqm of retail space in 2013. Hotel properties also saw growth to about 9,500 hotel rooms with star-classification in Metro Cebu, from 7,800 rooms last year, or an increase of 22 percent. The industrial market also presented high occupancy of 97.5 percent. Pinnacle said the total area of industrial zones in Metro Cebu is estimated to be at 120 hectares. “Overall, the Metro Cebu real estate market is very developed and has reached its maturity. There are still gaps in the market and some market inefficiencies that shrewd players may take advantage of. The recently approved vertical socialized housing, and the increase in the price and loan ceiling of economic housing may extend the boom in the residential sector. New township developments may spread out the centralized development in Cebu City. The industrial sector seems a looming winner as well,” said Pinnacle director for research and consulting Jojo Romarx Salas, in the same report. While Cebu remains a bright spot for real estate investments, the firm cautioned developers to study the mature Cebu market. “At any rate, Pinnacle maintains its advice of proper due diligence and detailed market study due to competition. Like most mature markets, healthy competition brings out the best designs and products at attractive rents and prices,” it said. “It’s no longer build and they’ll (buyers) come,” added Salas in an interview. He said there is more interest in mixed-use development or the work-live-play environment in response to the traffic woes experienced in the metro. Homegrown developer Cebu Landmasters Inc. remains optimistic in the local market, alongisde their provincial expansions. Cebu Landmasters chair Jose Soberano III earlier took note of the vibrant opportunities in Cebu, promising to deliver more projects for the local market amid their expansions in the provinces. One of its biggest to date is its P5-billion mixed-use tower in Cebu IT Park with El Camino Developers Cebu Inc. consortium composed of Cebu Landmasters, Gothong Southern Properties, Acrissor Development Corp., 12Sika Holdings Corp. and RKD Property Holdings Inc. Meanwhile, another homegrown developer Contempo Property Holdings Inc. is slated to expand its affordable housing projects and investing P1 billion in Cebu and Mindanao over the next three years. The strong dollar also spelled opportunities for property developers, having seen more house and condominium purchases from OFW families, said Leuterio Realty and Brokerage founder Anthony Leuterio. Moving forward, industry players see opportunities and growth no longer limited to Metro Manila and Metro Cebu, but in the provinces as well. Local players like Cebu Landmasters, Contempo Property Holdings and Grand Land are expanding to Mindanao, specifically in the cities of Cagayan de Oro and Davao. In it a report called Top 10 Predictions for 2017, Colliers International Philippines pointed out that the infrastructure plans of the current administration will dictate the direction of real estate developments beyond the term of President Rodrigo Duterte. In addition, it noted that the implementation of infrastructure projects nationwide could provide access to properties that could be redeveloped into mixed commercial, residential, hotel/leisure, and industrial estates. Carreon also noted that with more infrastructure projects due for implementation, the property and construction sectors are expected to experience a big boost.


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