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Dormitels: An emerging battleground for developers

7/14/2018

1 Comment

 

By: Catherine Talavera

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MANILA, Philippines — A new battleground is emerging in the local property sector as developers – from small startups to established giants – have taken more aggressive positions to corner a sizable share in a business seen to grow six-fold in two years.
A Cushman & Wakefield Philippines report said developers of the so-called dormitels – upscale dormitories with hotel-like accommodations – are expected to expand their combined bed capacity in the next two years to meet the growing demand among young professionals who prefer to stay in comfortable yet relatively inexpensive quarters near their central business district (CBD) offices.

Cushman & Wakefield analyst Alessandra Gaborni noted that dormitel capacity, estimated at 1,400 beds in the Bonifacio Global City (BGC) and Makati CBD area in 2017, “will expand to 5,300 beds by 2018 and to 10,200 beds by 2019.”

“What buoys up optimism among dormitel developers is this bit of information: Almost all the dormitel properties in the pipeline are leased out,” she said.

Gaborni said dormitel developers are targeting young professionals earning above-average salaries by developing affordable living spaces located near their places of work.
Gaborni cited the small land requirement, lower development costs and the shorter development period as some of the factors attracting developers to enter the dormitel business.

In addition, it also lures developers on the lookout for recurring income.

Among the big dormitel developers that have entered the market are MyTown of Philippine Urban Living Solutions wherein  conglomerate SM Investment Corp. acquired a 61.2 percent stake in; Ayala Land with its 1,500-bed The Flats BGC at 5th Avenue; and Anchor Land with its 3,000-bed Cosmo Suites.

“With big developers diving into the same business, it is important for proponents to adequately pace their projects and avoid saturating the market quickly with the same offering,” Gaborni said.

It added that it is equally important for proponents to offer innovative products and find niche markets in order to assure project viability.

Moreover, the report identified BGC, Makati, Ortigas and the Bay Area as potential markets for these dormitel developments.

“These markets could benefit from an affordable, yet somewhat upscale, dorm experience,” the report said.

“For some young professionals with more selective tastes and needs, and who also long for privacy, the amenities offered by typical dormitories are inadequate,” it added.

“For a while this segment of the property market for young professionals remained unserved. That was true until new and small property developers discovered and offered a new concept in small-space urban dwelling through dormitel,” the study added.  

The Cushman & Wakefield report noted that “the biggest driver for employees to move into dormitel buildings is the need to locate close to their workspaces.

“A Makati employee who lives in Quezon City would typically spend P3,000 to P4,000 every month to go to the office and go back to his/her home.  Those living farther from Makati will spend more money—and time—for travel.

“With the worsening traffic in the metro, coupled with rising transportation costs, employees are better off allotting P4,000 to P5,000 for a space in these dorm buildings. From their dorms, it will take them something like a 20-minute walk, or an P8 tricycle ride, to get to their offices in BGC,” Cushman & Wakefield said.

According to the report, a dormitel tenant still rents a bunk bed in a room of two to four people, but he/she enjoys the luxury of an en suite bathroom, an individual work desk, a locked cabinet, and a kitchenette usually equipped with a mini fridge and a microwave. Like those staying in modern hotels, tenants gain access to rooms and buildings via RFID cards or biometrics.

In the report, Cushman & Wakefield listed some of the existing and upcoming dormitel projects.
MyTown, the trailblazer in the business, rents out 800 beds spread over its three existing locations: MyTown Paris, MyTown London, and the 653-bed MyTown New York. Its aggressive pipeline of at least 5,000 additional beds across 13 buildings within the next two years suggests a stellar performance.  

​Property newcomer Point Blue—which markets their 10- to 14-sqm single-occupancy rooms as micro-studios—has one operating building with a 69-person capacity. It aims to add six more buildings with an average capacity of 69 to 155 rooms from 2018 to 2019. By 2020, Point Blue will construct a total of 20 buildings with about 2,000 units.

​Another local developer, DEI Properties, is operating two locations offering almost 300 bed spaces under their “iDorm at the Fort” project in the outskirts of BGC. Within the year, DEI Properties, is looking to open three more dormitel projects with 500 additional beds within the same area.

Other players in the BGC-Makati area include MySpace BGC, which offer 97 rooms with one- to four-person configurations, on top of a budget hotel component. BGC Hostel and Dorm, primarily a backpackers’ destination in Makati, offers bed spaces in their eight-person dorm rooms.

Cushman & Wakefield is a leading global real estate services firm with 45,000 employees in more than 70 countries helping occupiers and investors optimize the value of their real estate. It is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services, global occupier services, investment and asset management, project and development services, tenant representation, and valuation and advisory.

Source: https://www.philstar.com/business/real-estate/2018/04/06/1803129/dormitels-emerging-battleground-developers
1 Comment
Jeffrey Finley link
12/2/2023 01:02:49 am

Hi nice reading yoour blog

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