Building
construction in the Philippines will remain sluggish this year amid the dearth
of big-ticket projects, the lag time between approval of the project and actual
implementation, and the uncertain global market environment.
Ian Paolo Reyes, chief data analyst of BCI
Asia Philippines Inc., said while the first quarter is historically a high
season for private sector projects, construction activity is just not picking
up yet.
He said based on the company’s data, building
construction activity in January was the same as in December, when fewer large
projects were noted.
“We have data on expected starts, but due to
the nature of the construction industry in the Philippines it can be very
difficult to forecast beyond three months. What we can say is that January
starts were similar to December, which is weak. There are still projects out
there—still plenty of projects starting—just fewer large projects,” said Reyes.
“If none come through by typhoon season, then
2012 will be a very quiet year, but it’s too difficult to say what will happen
in the second quarter.”
He said the government’s commitment to
increase infrastructure spending like building additional classrooms could help
offset the weakness in other sectors but the lag time between project approval
and actual project implementation was another source of concern.
“Big projects in the tourism and education
sectors indicate that it isn’t all doom and gloom. Clearly, there are
expectations that those are areas worthy of investment and not just short-term
fads,” said Reyes.
“But it takes a long time for public projects
to move through to the commencing of works, so it is unlikely that public
projects will be able to start in time for the 2012 slow period either.
Projects awarded in mid-2012 might not be able to start until 2013,” said
Reyes.
The education sector, along with legal and
medical-related construction projects, made up just 5 percent of the market in
2011.
Meanwhile, he said the tourism and retail
sector made up 22 percent of project value reported by BCI last year. A growing
tourism industry could help prop up the market despite the weakness in other
sectors.
“Developers are highly attuned to market
expectations. If they don’t think their investment will be occupied fast
enough, then of course they will defer their projects until they think it
will,” said Reyes.
Condominium developers depend largely on
remittances from Filipino expatriate workers, while office project developers
look at how the services sector is doing, and retail developers rely on
consumer confidence indices.
“At the moment there are not a lot of deferred
or abandoned projects, we’re just not seeing many large projects come down the
pipeline. There are still projects out there, just less high-value building
starts,” said Reyes.
“What this tells us is that the loss of
confidence experienced in 2011 is having an impact on our industry now. If
global markets were to pick up now, there would be a similar delay until the
construction industry picked up again, just due to the time it takes for
projects to move through the design pipeline.”
Citing BCI Asia data, he said the value of
building construction in 2011 fell to P575 billion from a peak of P657 billion
in 2010.
“After a strong start to the year the industry
saw a dramatic drop of 80 percent to the lowest levels experienced since the
global financial crisis of 2009,” said Reyes.
Elaine Ramos Alanguilan
Manila Standard Today
Business & Investment Opportunities
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