Change is coming: Makati’s skyline set for a retrofit

Property developers are taking advantage of the COVID-19 pandemic and are tearing down and renovating their buildings in Makati. This means there will be changes in the country’s financial hub and the city’s skyline in the years to come.

This is according Leechiu Property Consultants CEO David Leechiu.

He said there are about 40 structures in Makati that will be brought down and rebuilt, and their reconstruction may take up to 10 years to finish depending on the changes.

“They have procured space for lease for the next seven to 10 years starting in the third quarter of last year. They are migrating out of old buildings into temporary new facilities, as they rebuild their headquarters, which will be completed anywhere [from] six to 10 years from now,” Leechiu said in a webinar hosted by the European Chamber of Commerce of the Philippines.

Ayala-owned structures in Makati, for instance, are undergoing reconstruction which are seen to change the skyline of the city. In 2019, the Bank of the Philippine Islands (BPI) began renovating its headquarters along Ayala Avenue.

In previous interviews, BPI officials said the plan is to put up two buildings on the site, with one intended for mixed-use purposes. As early as 2018, occupants of the head office started moving out of the facility to give way for its demolition the following year.

The Ayala Group is also scheduled to reopen a new Mandarin Hotel in 2023. The conglomerate had eyed to complete the hotel’s development last year, but gave up the plan due to the impact of the pandemic on construction, tourism and travel.

There are easily 40 individual properties in Makati that will be torn down and rebuilt in the next 10 to 12 years,” Leechiu added.

With that many buildings redeveloped, he said the landscape, visual, as well as the architecture of Makati will be transformed within the decade.

The property expert said developers start to modernize their assets in Makati in anticipation of a return to physical work and the comeback of offshore gaming once the economy recovers.

Last year, Makati saw its office spaces vacated by Philippine offshore gaming operators (POGO), as they await the enactment of a measure that will regulate their enterprises here.

At present, there are some 1.4 million square meters in vacancy in Metro Manila, of which close to half are fragmented spaces dispersed across 292 buildings. Makati, for its part, owns 109,000 sqm of this available stock based on records from Leechiu’s firm.

Beyond the changing skyline

It has yet to be seen, however, whether this availability will be filled out this year. On one hand, the government is struggling to contain a spike in COVID-19 cases and the spread of new variants, preventing it from authorizing industries to resume work at full capacity.

On the other hand, Makati may be considered the financial capital of the Philippines, but it faces competition now from the countryside in booking new investments.

Last year, Makati was outperformed by Iloilo in securing expansion projects from business process outsourcing (BPO) firms, as the regions close the gap against Metro Manila in acquiring fresh investments from BPOs.

Iloilo obtained 48,000 sqm of the take up in 2020 to beat all BPO districts, while Makati received 35,000 sqm to come in at second.

Areas outside of Metro Manila are now viewed by BPO locators as preferred sites for their expansions. Proof of this: roughly 43 percent, or 82,000 sqm, of the 191,000 sqm in office spaces leased by BPOs last year are situated in the provinces.

“We continue to be a big believer of Cebu, most of the Visayas, Clark and northern Luzon. I do think there is a lot of room for Davao and Cagayan de Oro for BPO expansions,” Leechiu said.

As the tug of war for investments intensifies, Leechiu said it is just right for developers not only in Makati, but in the whole of Metro Manila, to rethink their strategies in enticing multinationals to locate headquarters in their buildings.

As for Makati, it looks to take in a portion of the 266,000 sqm in office space demand this year, of which 88,000 sqm belong to the migrating BPOs and 31,000 sqm from familiar tenants and POGOs.

Only time will tell if Makati will remain as the business center of the country in the new normal. One thing is for sure, however: its list of rivals now go beyond Ortigas, Bonifacio Global City in Taguig and Alabang, as it now includes Cebu, Clark, Davao, Iloilo, even Rizal.