Growing demand for Metro dorms drives up condo vacancies

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GROWING demand for dormitories in Metro Manila amid its unrelenting traffic woes could exacerbate the decline in the occupancy levels of high-end residential properties in the months ahead, a real estate analyst said.

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In an interview on Thursday, Colliers International director for advisory services Julius Guevara told reporters that vacancies in high-end residential developments in the capital are expected to rise in the coming quarters, in part due to the continuing traffic woes in the metropolis.

“What we expect is that occupancy levels for the higher-end condos will start diminishing, so we actually see that already. Vacancy rates have started increasing in the past few quarters,” Guevara said.

Based on Colliers’ Q2 2016 property market report, vacancy rates for luxury residential properties in Makati rose to 9.79 percent in the second quarter from 8.33 percent in the first quarter of the year.

The same report showed that vacancy rates of prime residential properties in Fort Bonifacio rose to 9 percent in the second quarter from 8.7 percent recorded in the previous quarter.

Although dormitories and condos cater to different markets, Guevara noted that the emergence of the dormitory trend could aggravate the vacancy levels at high-end residential developments.

“Now the emergence of these dormitories might exacerbate the pace,” he said.

He said dormitories cater to the needs of those who are at the lower segment of the market, “those still in the entry level or they’re up-and-coming so they can’t really afford to rent their own unit.”

According to Guevara, the dormitory market has recently attracted the interest of developers such as the SM Group, which recently announced it was acquiring a minority stake of Philippine Urban Living Solutions’ MyTown dormitory brand.

“Other developers are looking into it as well,” Guevara said.

The dormitory trend addresses a lot of major issues such as affordability and traffic, he explained.

“I think this is addressing the need of those who cannot afford to purchase or own homes yet. It will address their need by being close to their place of work so they can save on transportation cost as well as time,” the real estate analyst said.

Dormitories are not necessarily new to the Metro Manila property market, he said. But the problem with some of the dormitories in the market today, which are mostly in old buildings, is that they are not well-maintained and are situated in rather “depressing” areas, he added.

“Innovations that these new dormitory developers are doing is that they’re providing condo-like amenities to their tenants, who are only paying about P3,500, P4,000 to P5,000. So at that small price point, they could enjoy the same amenities that you could find in some of the higher-end developments,” Guevara said.

The location of these dormitory developments is also a selling point as they are typically situated closer to the place of work of some renters.

“Some of them are in the fringes of Fort Bonifacio or Makati, so it’s very convenient walk to work,” Guevara said.

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