Is Iloilo City headed toward a property bubble?


It’s not that I don’t want Iloilo City’s economic development to screech to a halt. But looking at the frenetic infrastructure projects now undergoing construction (private sector development), I am worried that this would lead to a property bubble. At the pace new condominiums and malls are being built, there is a real danger supply would overtake demand, and many developers will be left holding an empty bag.

The retail market, for instance, is not big enough to warrant the operation of more stores in Iloilo City. The present retail floor space that are available for rent is already more than what the market could accommodate. Just recently, SM City opened its new wing, and many store spaces are still empty. That’s not to mention a number of restaurant closures in the giant mall.

Robinson’s Mall is opening another complex in Jaro at what used to be the campus of the De Paul College. Atria has gone full blast in its operations, mostly with restaurants in Barangay San Rafael. The Florete Group of Companies is rushing the completion of its Plazuela II along the Benign Aquino Jr. Avenue. Meanwhile, Megaworld is also going full swing in its construction of its strip malls in the Iloilo Business Park.

Filinvest and Ayala Land are also racing with each other to build condominiums within a 2-kilometer radius in Mandurriao. Not too far away are condominiums of Megaworld. Also about to commence construction is the mixed-use complex of Gaisano in Bolilao, Mandurriao.

Smaller malls have also been put up in other parts of the city. Double Dragon Properties Corp. has opened its City Mall in Barangay Tagbac, Jaro. Another City Mall is slated to break ground in Barangay Ungka, Pavia before the middle of 2016. A third City Mall is going to loom large over the scenic Guimaras Strait as part of the Parola Ferry Terminal. The group of Alfonso Tan is now operating GT Mall near the Molo Plaza.

There is no mistaking that development is taking place at breakneck speed in Iloilo City. A quick glance at all these activities couldn’t fail to impress the observer. But we need to learn lessons from history — business history. Property bubbles are always a danger when development takes place at such high speed. The demand might not be able to sustain the market supply’s growth.

Among the developers, I find the Double Dragon strategy of locating its new malls in the periphery of the city more prudent. It avoids the potential congestion that might only worsen the already bad traffic situation on the Iloilo Diversion Road (aggravated by poor traffic management practices of the LGU). And as the City Malls are situated in the outskirts, they will be able to snare much of the people who want to avoid the traffic.

Of course, these developers didn’t just jump into pouring hundreds of millions of pesos in investments for malls and condominiums without extensive feasibility studies. That the developments are concentrated in the Mandurriao district seem to follow the model of Metro Manila, where malls and condominiums are built in concentric circles. The residences are  always a stone’s throw away from restaurants and shops. This is the model in Alabang, Eastwood, Greenfield in Mandaluyong and many more.

What I fear is that the buying power of Ilonggos might not be enough to fuel this growth. Even in the number of restaurants that have opened for business, one can easily see that customers flock to the newer ones, leaving the older restaurants with fewer diners. The dining market base hasn’t grown that much to make the opening of more restaurants viable. It’s the same way with shoppers.

I would want to see this growth sustained. The LGU should be laying the foundation for increasing the buying power of its people. Unfortunately, that is not happening. There are no industries that could provide good paying jobs for the people. If there are jobs being created, these can be found in the services sector — restaurants, retail outlets, call centers. This will fall short of what is needed to sustain this growth.

Our leaders should take steps to avoid a meltdown. They should not be lulled into a false sense of achievement. The public investments are being poured into the wrong areas. We are not building the necessary infrastructure for sustained development. The crash can happen sooner than anybody might expect.

 

About Manuel "Boy" Mejorada
Manuel "Boy" Mejorada is a journalist and social media activist. A former Iloilo provincial administrator, he is now waging a crusade against corruption and narco-politics.

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