Real estate companies deals with the development retail, industrial, residential, medical and business office facilities and buildings. These can be residential apartments, shopping centers, factories, retirement homes, offices and etc. XRC resources holds companies under it that develop community malls falling under the retail category.
According to the Department of the National Statistics office there were 28,347 buildings/ houses constructed in the 1st quarter of 2011 costing about P52,771,886 thousand, 27,525 in the 2nd quarter costing P55,669,177 thousand, 25,255 in the 3rd quarter costing about P41, 628,460 thousand and with the fourth quarter of that year yet to be released. 6,194 of which were commercial buildings costing P41,208,750 thousand . Comparing the value of the buildings/houses to the previous year, quarter per quarter there was a 11. 6% growth for the 1st quarter, 13. 4% for the 2nd quarter and a -10% growth for the third.
Resulting in an overall increase in money spent for construction. During the same year real estate, renting and business activities generated a estimated total amount of P514, 808 million (not including the 4th quarter) pesos contributing 7. 35% to the Philippines GDP being one of the top industries that generates the most money, third only to “Trade and repair of motor vehicles, motorcycles, personal and household goods”(P1,181,494 million) and “Manufacturing” (P1,428,330 million). Comparing the 1st through 3rd quarters of 2011 and 2010 there was an 11. 19% increase in peso generated showing a large growth in the industry.
On that note, the real estate industry during 2011 also had 3,400 employees that increased by 200 since 2010. The Philippines is a fast developing country needing a continuous change in its landscape to accommodate its growth. From the data acquired we can see that the Philippines’ real estate industry is doing just that. Continuously increasing both the quality and number of buildings being developed, meeting higher quality standards and boasting growth and innovations in their productions. Providing buildings for both residential and non-residential use such as offices, shopping malls and factories.
We can see widespread construction that constantly transforms provinces into cities and Metro Manila as a world-class metropolis. Attracting both oversees Filipino workers and foreigners wanting to establish permanent residence and tourist wanting to take a vacation here in the Philippines and supplying the demand of the upsurge in business process outsourcing (BPO) companies creating an increase in income and employment for the Philippines. This increase in employment fuel consumerism and resulted in a demand for better residential units and more commercial spaces.
In effect foreign investors sees the Philippines as a viable investment opportunity due to the large growth and development, the steady increase in increasing tourist arrivals and business process outsourcing (BPO) that are all affected by the real estate industry in one way or another. Thus the Philippines is expected to emerge as a developed country with modern metropolitan areas conducive to live and to do business in subsequently increasing the price of real estate and laying a solid foundation for further industry growth. . ) Industry structure (profile and history of major players – their size, scope, profitability, influence, strategies, resources and value networks) There are numerouse players in the retail leasing industry and two of the biggest names are SM Prime Holdings SM Prime Holdings has gone a long way from being a shoe store to one of the major players in the Philippines and the Real estate industry. The company can be found nationwide, transforming its malls into prime destination for shopping and leisure.
Currently holding 41 malls nationwide, 4 malls in China and plans to grow even more by constructing 5 more malls outside Metro Manila and 3 more in China. Having a net income of Php 9. 1 billion increasing by 15% form the previous yearand gross revenue by 13% in 2011 not accounting profits from China by increasing occupancy rates, number of commercial spaces, decreasing energy costs, managing operation systems. The company plans to begin constructing new malls in both the Philippines and
China having a capital expenditure for 2012 of Php 21 billion, Php 14 billion for the Philippines and Php 7 billion for China. Robinsons land corporation Robinsons Prime Holdings is the real estate investment arms of JG Summit Holdings inc. engaged in numerous projects such as operation and development of malls, hotels, offices, residential buildings and other multi use properties. The company is one of the Philippines major players in the real estate industry in terms of its size and number of projects and is continuously growing.
As of 2011 Robinsons Prime holdings is holding 29 malls nationwide compromising of 6 malls located in Metro Manila and 23 malls in other provincial cities throughout the Philippines. Expanding to other regions by opening 7 new malls and 3 expansion projects to sustain its growth momentum. Having revenue of Php 6. 21 billion for 2011 which comes from the commercial center division alone. c. ) Key external forces affecting the industry A. Socio-cultural Environment The retail leasing industry highly depends on the foot traffic it can draw in its shopping centers and malls in order for it to get good tenants.
Good can be defined as tenants that can pay on time and profitable or branded. The company must check the location of the market if it is ready for a shopping center by looking for signs of development and see if the market has enough buying power. After the development of the shopping center a good tenant mix is needed to draw the crowd in the mall. A tenant mix that would fit the need of the demographic of the specific location. There are similar values that each demographic share in the Philippines which is the Filipino values such as importance of family and love for food.
As such it is important to have a good number of food stalls or franchises inside the mall as well as other stores that could provide amusement for each member of the family as they circle around the mall. But although there are similar values there are still differences between community such as spending habits and buying power. Other than a good tenant mix special events or shows are used in attracting customers into the malls such as art galleries in more prominent malls such as Shangrilla or more community based events such as talent shows in smaller shopping centers.
These companies receive the bulk of their income from rents collected from their tenants. So it is important for the company that the tenants can make money in their establishment in order for them to continue their contract. The tenants are attracted by a number of factors such as foot traffic at the commercial space, having a well-known name in the industry such as SM, the rate of rent, the location of the available space in the mall and etc because these factors help tenants become profitable. Acquiring good tenants and high foot traffic goes hand in hand as they attract each other.
B. Technological Environment (emerging technologies and their impact on industry practices) Geo fences Geo fences are virtual perimeters set around a location or an area that can track persons within that area, when they leave and when they enter using Global Positioning Satellite (GPS) technology. Persons or units that are to be tracked must be outfitted with a GPS chip or a wireless technology with GPS in order for it to work. It has been widely used due to its many benefits. Geo fences have been used in tracking family members, employees, delivery trucks cargo and etc.
It can also be applied to the real estate industry by automatically informing potential buyers through an email or text message once they go in a geo fenced area about a real estate near their location. In order for potential buyers not to be over encumbered by numerous messages companies through online portals can ask these buyers for details on their preferred real estate and match them to their data base. In effect only geo fences surrounding the real estate matching their descriptions would set off a message alert. Smart concrete
Dr. Deborah D. L. Chung from the State University of New Your at Buffalo developed smart concrete which is concrete reinforced by carbon fiber as much as . 2% to 0. 5% of its volume increasing its strength and ability to sense strain or stress. With its ability to detect stress the smart concrete it can monitor the condition of the structure and sense structural flaws before they can be significant and do harm. It lessens the time and effort in monitoring structural flaws enabling the owner to prevent collapse before it happens.
Not only is smart concrete stronger than conventional concrete it has greater resistance to bending and absorbs more energy before fracture. Smart concrete is still undergoing extensive testing and not yet available on the market. It is predicted that it would cost about 30% more than conventional concrete but still would be cheaper than embedding sensors into structure. C. Economic Environment The real estate industry can be classified as a cyclical business meaning it frequently undergoes a rise and fall throughout the years since it relies heavily on the spending power of consumers at a given point in time.
Observing and understanding how the market moves can be the key in being stable or growing in the industry. Investing in properties during market decline maybe a waste of investments since there is not much money circulating in the market for consumers to spend. In the retail real estate industry tenants maybe unable to pay rent on opt not to continue their business especially small business tenants during economic downfall. It would be a bad time to invest in the construction of a new mall during this time.
In times of prosperity the demand of commercial spaces increases as the consumers have the money to spend and try to continue, expand or start a new business. Although when the markets are really slow it maybe be rewarding to purchase real estate while they are cheap for future use. Stock markets can be good indicators of the status of the real estate industry since the stock market and properties have a similar trend. This is most probably due to the fact that during and up trend investors has more money to spend and invest in properties especially when they earn a big profit in the stock market.
Construction of a building takes time depending on how large the establishment is, so it is important for retail real estate developers to predict future market movements before putting up a new shopping center. In cases where in a high demand in comercial space arrises and construction of a new space is not at option created spaces can be made. Mall owners can rent spaces inside their malls which were not originaly meant for leasing in the floor plan to meet the demand. D. Natural Resources Environment
As the Philippines developed more and more resources are being used, especially today when the number of constructions is constantly increasing. Select construction materials have been selected in the National Capital Region to as reference to the increase in prices. Generally the cost of materials has increase to 5. 0% in July from the 4. 7% in June using the year-on-year price index comparing 2012 to 2000.
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