Waiting at the crossroads: a big ‘move’ by a Philippine business district?August 28, 2013 / By
The Philippine Court of Appeals has issued a decision declaring Bonifacio Global City (BGC) to be under the jurisdiction of Makati City, not Taguig City which has been the ruling local government since its conception. BGC is part of a 700-hectare disputed area which borders Makati City, Taguig City, Pasig City and the Municipality of Pateros.
BGC, a 240-hectare business district, started offering office developments in 2001 with 40,000 sqm leasable space and today this has grown to approximately 600,000 sqm. Future developments to be completed by 2016 will contribute another 700,000 sqm. Residential developments are also growing at an aggressive pace, with 18,000 units completed since 2000, and another 18,000 units to come on stream in the next five years. Positive investor sentiment is evident as prices and take-up rates of office and residential space have reached levels comparable to Makati CBD.
Land values have exhibited accelerated growth rates over a short period, doubling in ten years mainly due to heightened investor interest for office buildings buoyed by an increasing number of offshoring and outsourcing (O&O) tenants. This movement in the office market also feeds demand for residential, hotel and retail space in the area. There have been only four major retail projects in BGC since 2004, but from 2013 to 2015 another four will accommodate growing demand. The district is likewise set to house four new hotel ventures, in addition to the two currently in operation.
Makati CBD, the 200 hectare prime district within Makati City, was the first centrally planned community and has been recognised as the prime business district in Metro Manila for over 40 years. Among the major selling points of BGC is its proximity to Makati CBD, which has remained the benchmark for property prices and rents. BGC is an alternative location which is very accessible, has a lower daytime population and more land available for future development. Both districts aim to simulate virtual first world environments for their occupiers.
Any potential change in jurisdiction over BGC may initially cause some change in investors’ perception of the district because part of the decision to locate there may be ascribed to its current administration and overall management. The weighted cost-benefit trade-off between fees paid to the current local government compared with fees payable in other districts is one of the multiple factors to be considered by management in their locational decision.
The onset of potential change in the local government jurisdiction over the district may bring about management uncertainty for occupiers. Current policies and practices in the district may change but the degree of change and transition to this change may be a matter of contention. Real-estate consultants may also have to review their previous forecasts for this market.
The current operations of BGC have enabled it to continuously attract occupiers and achieve values that are comparable to Makati CBD. Ultimately, the undisrupted flow of business operations will be the key to further investor confidence in BGC.
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