Cheap oil to fuel rally in retail, property sectors this year

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THE retail and real estate sectors will be this year’s economic drivers amid the drop in oil prices and the strong demand for commercial retail and office spaces.

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Philippine-based property services firm KMC MAG Group Inc. said crude oil prices hitting all-time lows have been benefiting the retail and real estate segments in the country which are seen to rally this year, especially the township and office space developments for the property side.

“For every $10 oil price drop, the Philippines saves $1 billion from 100 million oil barrels purchased and imported. And these savings are likely to flow into the retail and real estate sectors which will be beneficial for both,” Michael McCullough, managing firector of KMC MAG, said in a press briefing on Thursday.

“The Philippine real estate is in a very bright spot right now. Major property players are allotting a record P331 billion in capital expenditures [capex], which are mostly allotted to years-long development of townships and boost in office spaces on very strong demand,” he added.

McCullough also noted that in order to fund their capital spending, the companies have raised over P70 billion from the fixed-income bond market.

KMC MAG noted that 2015 will be mostly a “township year” given companies’ massive expansion efforts to build their own mixed-use developments.

McCullough also said that the Philippines will be receiving a lot of investments from Australia, Europe and other Asian countries, among others, to build business, office and factory warehouses in the country.

“We don’t see [property and investments]slowing down. We see a lot of investments from Australia, Europe and Asia, which are mostly coming to Bonifacio Global City [BGC],” he said.

Speaking of BGC, KMC MAG head of operation and investments Jose Carmelo Porciuncula said that the 5th Avenue in BGC is “becoming the new Ayala Avenue” as most upscale office towers are being built along the area which will be occupied by major firms Coca-Cola, Google, Sony, P&G, HSBC, Philam Life and Sun Life Financial.

“There will now be a premium in establishments locating near 5th Avenue. There is a natural need for prime space in the area. On 5th Ave, everything there will be pretty much built in a 10-year period. It will have a different feel and look than Ayala. And it is definitely what the establishments are eyeing as more and more businesses flock to BGC,” Porciuncula said.

Big property players currently engaged in township development include Megaworld Corp. Ayala Land Inc. and SM Prime Holdings Inc.

Further, developers like Federal Land Inc. and Vista Land and Lifescapes Inc. have also turned to township development with the build ing of Metropolitan Park and Veritown Fort for Federal Land, while Vista Land is now focused on its large-scale flagship mixed-use project Vista City.

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