Fort Bonifacio, a new city that has risen from a former military camp in just a decade, is set to become the country’s top commercial business district soon, eclipsing the Ayala Center in nearby Makati City, according to real estate executives.
The well-planned business district on the borders of Taguig and Makati, where power lines are laid underground and a modern sewerage system is in place, will soon become the home of the Philippine Stock Exchange, which is transferring from the Makati CBD in 2016.
“Dubbed as the next Makati, Bonifacio Global City is set to be the future financial district in the Philippines. The establishment of a new Philippine Stock Exchange, which will be part of a mixed-use block to be developed by Ayala, is one of the factors that signal a possibility of this trend,” says real estate services firm KMC Mag Group.
Multinational banks such as Hong Kong & Shanghai Banking Corp., Standard Chartered Bank, Deutsche Bank AG and J.P. Morgan Chase Bank established their headquarters, along with their back office operations in Fort Bonifacio CBD. Globe Telecom, one of the country’s most profitable companies, made a bold move of transferring its more than 1,000 employees to Fort Bonifacio last year.
St. Luke’s Medical Center, one of the country’s top hospitals, opened a 16-story medical building with 600 patient beds and 374 doctors clinics and 10 institutes in 2009. Several foreign embassies have relocated to Fort Bonifacio, which now has two major shopping centers–SM Aura Premier and Market! Market and several retail outlets and restaurants at High Street, Serendra, The Fort Square and The Fort Strip. Two world-class hotels will soon open in Fort Bonifacio, including Shangri-La at the Fort and Grand Hyatt Hotel.
“Is Fort Bonifacio on track or preparing to be the main CBD of the Philippines? If the current trajectory or the current growth momentum continues, I guess the answer is yes,” says Megaworld Corp. senior vice president Jericho Go, who is in charge of the real estate company’s projects in Fort Bonifacio.
Megaworld, the property development arm of tycoon Andrew Tan, is the largest landlord in Fort Bonifacio, with a landbank of 105 hectares in the CBD, including the now fully-developed 50-hectare McKinley Hill. Other developers, with long-term contracts with state-run Bases Conversion Development Authority in Fort Bonifacio, include Ayala Land Inc., Bonifacio Land Development Corp., Evergreen Holdings Inc., The Net Group, Federal Land Inc., Vista Land Inc., Century Properties, DMCI Homes, Arthaland, Northshore Holdings Inc. and SM Prime Holdings Inc.
Fort Bonifacio CBD is comprised of several townships, one of them the Bonifacio Global City of the Ayala Group. Federal Land of tycoon George Ty has the 27-hectare North Bonifacio district. Megaworld has four townships in Fort Bonifacio, including the 50-hectare McKinley Hill, 34.5-hectare McKinley West, 15.4-hectare Uptown Bonifacio and 5-hectare Forbes Town Center.
Megaworld alone has 34 residential buildings with 4,713 condominium units and 17 office buildings with a combined 300,000 sqm of office space in McKinley Hill, which the company describes as the emerging center of metropolitan business. McKinley Hill is also home to the British, South Korean, United Arab Emirates and Qatar embassies and international schools such as Enderun Colleges and the Korean International School Philippines.
“Several premium and Grade A buildings with sustainable and efficient design are also set to be opened within the next two years, showing the city’s huge potential to match Makati’s amount of supply and surpass its buildings’ standards,” says KMC Mag Group, an international associate of Savills, one of the top real estate firms in the world.
Office space stock
KMC Mag Group says while Makati and Ortigas CBDs still have more office buildings than Fort Bonifacio, this will not be the case in the next few years. It says in terms of premium or Grade A office space, Fort Bonifacio has already outpaced Ortigas and will likely surpass that of Makati soon, given the shortage of land in Makati. “Because of the shortage of developable land in Makati CBD, there is currently only one office development, Frabelle Business Center. It is slated to add only 8,000 sqm of leasable space once turned over by the end of the year ,” it says.
KMC Mag Group says developments in Makati CBD, which has total stock of 1.1 million sqm of Grade A and premium office space, are expected to stagnate in the following years.
It says while Ortigas, home to local conglomerates such as Jollibee Corp. and San Miguel Corp., is still the second largest CBD in the country, “its stock is outdated and Grade A office space is only at 568,000 sqm,” compared to Fort Bonifacio’s more than 700,000 sqm.
“The current stock of premium and Grade A office space in BGC will soon match Makati CBD’s existing stock as there are several new developments in the district,” KMC Mag Group, which is headquartered in Fort Bonifacio, says in its mid-year 2014 report.
Megaworld says it is developing another 50 hectares in Fort Bonifacio. “Because Makati has already matured, there are only a few number of vacant spaces for development. Having said that, Megaworld continues to have substantial presence in Makati as well. That’s why we have a Makati group that continues to build residential condominiums there for sale. But of course Fort Bonifacio, as I have said, as far as Megaworld is concerned, we are the largest landlord there. We have 105 hectares of landbank. About 50 percent of that is developed. McKinley Hill is 50 hectares. So the balance, that is still up for development,” says Go.
KMC Mag Group describes Fort Bonifacio as a rapidly expanding CBD that is home to premier residential and office spaces. “Good infrastructure development and high-quality office spaces have enticed BPOs, multinational companies and conglomerates to set up their offices in the area. It also hosts several international schools, museums, public parks and a premier medical facility catering to its growing cosmopolitan community,” it says.
KMC Mag Group says the completion of Panorama Tower and 11th Corporate Center
increased total stock of Grade A office space in Fort Bonifacio to 700,000 square meters. The figure likely added another 90,000 sqm by the end of 2014 with the completion of MDi Corporate Center, Uptown Place Tower 1, Twenty-Four Seven McKinley, Orion and Del Rosario Law Building. Grade A office space monthly rent in Fort Bonifacio hovered at more than P800 per sqm, up by 8 percent from 2013.
KMC Mag says Fort Bonifacio is now the most active business district, generating over 50 percent of the growth in the property market. The increase is driven by the bullish office markets, especially BPO companies who opt to locate in the buildings in the area. Rental rates in Fort Bonifacio are also slightly lower than in Makati.
It says Fort Bonifacio has more available space for rent or lease and sale compared to Makati, as most buildings are still in development. Stocks, however, are quickly declining due to high demand in the area.
Megaworld has a major stake in the continuous expansion of Fort Bonifacio. “I think Fort Bonifacio will continue to be a strong driver for growth for the company in terms of revenue and recurring income. But having said that, we are also emboldened to continue to grow our business in the provinces in Iloilo, Cebu and at some point Davao as well. This helps us balance our portfolio,” says Go.
The popularity of Fort Bonifacio as CBD, however, has driven land prices to the roof. Colliers, another real estate research firm, says land values in Metro Manila reached a new peak in 2014.
“Land values have now, after 17 years, exceeded their previous 1997 peak,” Colliers says, noting that pension fund Government Service Insurance System sold two lots in Fort Bonifacio, with land areas of 1,600 sqm each, to Focus Palantir Inc. and Goldenwill Inc. Focus Palantir won the bidding for the first lot with an offer of P500,000 per sqm while Goldenwill won the second lot for P458,000 per sqm. These figures match the land values in Makati and surpassed the land value in Ortigas at only P154,000 per sqm.
Colliers estimates that by the end of 2014, total office space stock in Metro Manila reached 8 million sqm, including 2.85 million sqm in Makati, 1.383 million sqm in Fort Bonifacio, 1.378 million sqm in Ortigas, 397,863 sqm in Alabang, 300,263 sqm in Eastwood and 1.764 million sqm in other locations.
Real estate prospects
Business executives remain bullish on the prospects of the real estate sector, despite the rising land values that may lead to a price bubble. Ayala Land president and chief executive Bobby Dy says the Philippines is entering a demographic sweet spot, where more young individuals join the labor force and contribute to the economy. He says this will keep the economy and the real estate sector afloat in the coming years.
Philippine Savings Bank president Vicente Cuna Jr. agrees, saying monetary officials at the Bangko Sentral ng Pilipinas put in place the necessary policy to avert any real estate price bubble. “The new regulations are meant for the BSP to be ahead of the curve. I don’t think they see a bubble. The banks are still lending, the banks have not stopped lending for housing. The BSP is taking a precautionary stance by being ahead of the curve. It is a proactive stance,” he says.
Go, the senior vice president of Megaworld, says the sustained growth of the real estate sector will be good for the economy. “When we develop townships, there is such a big multiplier effect that we are able to achieve. If we only develop 100,000 sqm of office space every year, we should be able to create direct and indirect employment of 250,000 jobs a year. So in four years time, that’s about a million,” he says.
“We are very optimistic about the prospects for real estate sector for 2015. The reason we are saying this is because we continue to receive a healthy pipeline of demand for office and BPO sector. We all know that once this creates employment, then the multiplier effect is always triggered. There is a need for transportation, for residences, for retail, for food, for medical care and the likes. That’s why we want to continue to move forward in terms of our development and as part of our commitment to nation building,” Go says.
Go says five years from now, Fort Bonifacio “is going to brim with a lot of employment opportunities, fueled by business process outsourcing and of course, hand in hand with that, the need for more places to reside. That fuels spending, retail will follow suit.”
“They are all saying that in terms of number of new condominiums, offices being developed, Fort Bonifacio has already outpaced Makati,” says Go.
“It all boils down to proper planning. Megaworld has four townships in Fort Bonifacio. We would like to believe we are in the forefront of helping achieve that vision of creating a vibrant, new central business district in the Philippines,” he says.