Rockwell Land to continue expansion in Cebu, Iloilo
Rockwell Land Corp. plans to further expand outside of Metro Manila despite the pandemic. Rockwell Land President and Chief Executive Officer Nestor Padilla said the company is now developing communities in Cebu and Iloilo. The company is also under discussion for a potential joint venture project in Pampanga. Valerie Soliven, Chief Revenue Officer, said that the shift in consumer behavior led to revisions in their plans. Included in the firm’s pipeline is a 30-hectare mixed-use development in Bacolod city that is scheduled to be launched in 2021. Rockwell Land expects demand for horizontal residential projects with large open areas to increase given the impact of the pandemic.
As a result of the pandemic, we believe that both investors and end-users may likely consider housing within lower density communities outside of Metro Manila offering larger units with more open space. These include areas such as Bacolod and Iloilo. The two areas are among the most competitive cities in the country based on the 2019 Cities and Municipalities Competitiveness Index and continue to attract national developers. Colliers has also observed sustained demand for horizontal projects in both areas. From 2017 to 2019, the average annual take-up of house and lots (H&L) in Bacolod City reached 1,480 units from the previous 890 units per year from 2014 to 2016. In 2019, the take-up of H&L in Iloilo City also grew by 6% to 524 units, from 496 units in 2018. Despite the potential slowdown in 2020, we project demand for horizontal projects to rebound in 2021 on the back of macroeconomic recovery and stronger OFW remittances.
Pandemic forces retailers to innovate, adapt
Consulting firm Bain and Company notes that Philippine retailers were forced to adapt and innovate given the impact of the pandemic on consumer spending and e-commerce. Derek Keswakaroon, a partner at Bain and Company Bangkok, believes that retailers should take advantage of digital disruptions by boosting their marketing. Retailers should also focus on renewing their value proposition to prioritize customer needs such as improved convenience. Keswakaroon added that brick and mortar stores will likely remain in the future, but retailers need to improve operations and reinforce assets. Newer store formats will likely include re-sizing and re-spacing. Bain and Company noted that the retail industry of the country is less mature than other markets such as South Korea and Australia. In a report published by the group, the Philippines together with Mexico, Russia, Malaysia, and Thailand are part of developing digitalizers that are behind more mature markets with high digitalization.
For the remainder of 2020, we project a slowdown in retail demand due to the decline in consumer confidence and implementation of strict social distancing protocols in public establishments. This will likely lead to Metro Manila retail vacancy rising to 12% by the end of 2020, up from 9.8% in Q3 2019. We expect retailers to continue adopting omnichannel strategies by further tapping the e-commerce market. Consumers will likely be attracted to the convenience of acquiring goods online. According to Lazada Philippines, during the lockdown, the average time spent by consumers on their platform doubled to 15 minutes. Transactions on the Lazada mobile application also increased by 9% during the period. This increase in demand supports the growth of the e-commerce sector. We recommend that e-commerce platforms expand their offerings and partnerships with retailers to further improve the Filipinos’ online shopping experience. Lazada, for instance, has partnered with Union Bank of the Philippines to launch the first e-commerce credit card in the country.
Developers given extension to complete projects
Based on the Department Order 2020-010 that was issued by the Department of Human Settlements and Urban Development (DHSUD) on August 26, 2020, residential developers will only be given a one-year extension to complete their projects. DHSUD Secretary Eduardo del Rosario said the maximum extension was given due to construction delays caused by the pandemic. The extension is calculated based on the completion date as noted on developers’ licenses to sell. Developers who are in need of additional time may also apply to the regional DHSUD within two months after the effectivity of the guidelines. A revised work program and a performance bond will also be required for submission.
Based on Q1 2020 data from the Philippine Statistics Authority, the number of approved building permits reached 30,838, down by 22.4% from 39,762 in the same period of 2019. Residential construction permits also declined by 25.5% YoY to 20,515. The decline was due to the impact of the pandemic on the construction sector. Aside from public construction, private developers were also affected as projects were put on hold due to limited mobility of workers. As a result, we now project the delivery of about 6,270 condominium units in Metro Manila in 2020, down by 57% from our initial forecast of 14,720 units. Delayed completion will likely temper the rise of vacancy in the secondary residential market. Given the adverse impacts of the pandemic, Fitch Solutions now projects the Philippines’ construction industry to contract by 9.8% in 2020. The bearish outlook is a reversal from its initial projection of 2.9% growth. Despite the gloomy projection, the group believes that the sector will likely rebound in 2021 with a 9.5% growth.