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Quarterly Property Market Report
PHILIPPINES
2Q 2016 August 9, 2016
Buoyant economy drives growth in property sector
Julius Guevara Director | Research & Advisory
The accelerated economic growth during the second quarter was echoed by the office property market, where high occupancy levels have been sustained by the BPO industry. An increase in tourist arrivals failed to uphold the hotel market, where a softer gaming market and new completions will suppress occupancy rates in the short term. The resurgence of the manufacturing sector has led to increased demand for industrial space, with a further boost set to come from the implementation of vital infrastructure projects. Meanwhile, the outlook for the residential condominium sector remains subdued amid oversupply concerns.
Forecast at a glance
Demand The BPO market continues to lift the office market, with no sign of letting down.
Supply Construction delays due to the lack of skilled labor will continue to affect the new supply to be delivered for all sectors.
Vacancy rate Residential condominiums in the core areas will continue to see rising vacancies amid a deluge of new supply in the fringe areas. Meanwhile, delays in office completions will lead to even lower vacancies for office buildings.
Rent Rates for condos are still seen to continue to soften because of the new supply coming up. While office demand is strong, all-time highs in office construction will rein in sharp upward rental rate movements. Meanwhile, improvements in industrial rents will continue.
The Philippine economy accelerated by 6.9% during the first
quarter of the year, the fastest in East Asia. The expansion is
primarily attributed to sustained growth in investments and
household expenditures complemented by ramped up public
infrastructure spending. The prospects for economic growth in
the second half of the year remain rosy given the benign
inflation environment, continuously improving job situation,
modest increase in overseas Filipino workers‘(OFW)
remittances, and higher foreign direct investment (FDI) inflows.
Office. An estimated 75,000 sq m of new office net usable area
was completed in the second quarter of this year, bringing Metro
Manila’s office stock to around 7.7 million sq m. Makati CBD’s
office market remains tight due to the lack of new supply.
Vacancies in Fort Bonifacio should remain low over the next
twelve months due to sustained demand from outsourcing firms
which tempers the significant amount of additional office space
being completed in the area.
Residential. Six projects were originally slated for delivery in 2Q
2016 but only one was completed. The delay in completions is
attributed to the acute lack of skilled labor in construction. Rents
in the major CBDs continue to correct amid heightened levels of
unit completions in the outskirts.
Hotel and Leisure. More than 900 new hotel rooms were
completed in Metro Manila during the first six months of 2016.
Hotel occupancy rates in Metro Manila declined marginally
despite higher tourist arrivals and expenditures. International
tourist arrivals have steadily been growing since 2010 and the
Philippines has the potential to become a major tourist
destination in the region but the country lacks the necessary
infrastructure to compete with other ASEAN destinations and
attract more tourists. Developers should continue to invest in
hotels in the near term but watch out for oversupply of casinos in
the medium term.
Industrial. Total industrial stock in the Cavite-Laguna-Batangas
area reached almost 6,900 hectares as of 1H2016. Colliers
sees supply in the area increasing over the near- to medium-
term due to the government’s push to attract more
manufacturing investments. The current administration’s thrust to
aggressively implement infrastructure projects outside Metro
Manila bodes well for the thriving industrial sector in the fringe
provinces. The government’s efforts to attract more
manufacturing investments should lead to higher demand for
industrial lots and this, coupled with limited supply, should raise
land values in the region.
2 Research & Forecast Report | 2Q 2016 | Colliers International
PH economy up 6.9% in 1Q; indicators point to faster 2Q growth
The Philippine economy expanded by 6.9% during the first quarter of the year. During the period, the country registered the fastest GDP growth amongst the major economies in East Asia. For the first time in nearly three decades, the Philippines outpaced China’s growth.
The economic expansion is primarily attributed to
sustained growth in investments and household
expenditures complemented by ramped up public
infrastructure spending. Gross fixed capital formation,
which refers to combined domestic and foreign
investments, grew 26% during the quarter. This is the
highest growth recorded in the past 23 quarters and
indicative of rising investor confidence in the country.
Household consumption increased by 7% due to low- to
stable prices, improved employment figures (January
2016 unemployment of 5.8% is the lowest in 10 years),
modest growth in overseas Filipino workers (OFW)
remittances, and a windfall from election-related
spending. The latter also propelled public infrastructure
expenditures which grew by almost 40%, a turnaround
from a 23% decline posted in the first three months of
2015. Despite uncertainties in the global economic
landscape, exports still managed to grow by 5.2% in the
first quarter of the year. Semiconductor exports, which
account for 40% of the country’s merchandise exports,
grew by 15%.
The industry sector rose by 8.7% from 5.3% in the first
quarter of 2015. The growth was driven by construction
(+10.8%) and manufacturing (+9.1%) subsectors. Private
construction recorded a 7.1% growth complemented by
increasing demand for office equipment such as air-
conditioning units (+49%) and office machines and other
data processing equipment (111%). The services
sector, which expanded by 7.9% from January to March
of this year, was propelled by real estate, renting, and
business activities (RERBA); transportation, storage,
and communications; banking and finance; and retail
trade. The Other Services subsector which includes
hotels, restaurants, and other tourist-related services
rose by 8%. Agriculture continues to underperform,
declining by 4.4% due mainly to the adverse effects of
the El Niño phenomenon.
The prospects for economic growth in the second half of
the year remain rosy given the benign inflation
environment, continuously improving job situation,
modestly increasing in OFW remittances, and higher
foreign investment inflows.
Inflation during the second quarter of the year rose to
1.5% from 1.1% posted in the previous quarter. Average
inflation recorded for the first half of the year is 1.3%,
well below the government’s range target of 2-4% for
2016-2018. A poll conducted by the central bank in June
showed that private sector economists are projecting an
average inflation of 1.8% for the year due to low oil
prices, cheaper utility rates, and sluggish global
economic growth.
The April 2016 Labor Force Survey (LFS) showed that
employment improved to 93.9% from 93.6% recorded in
the same period last year. The total number of
employed Filipinos rose to 39.9 million from 39.2 million
a year ago. The agriculture sector lost 1.5 million jobs
but this was offset by additional jobs generated by
Industry (+840,000) and Services (+1.41 million)
sectors.
Economic Indicators
Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015* 1Q 2016
Gross National Product 6.1 6.0 6.5 8.4 3.2 6.4 7.5 5.8 5.8 7.6
Gross Domestic Producta 6.6 4.2 1.1 7.6 3.9 6.8 7.2 6.1 5.9 6.9
Household Final Consumption Expenditure 4.6 3.7 2.3 3.4 6.1 6.6 5.7 5.4 6.3 7.0
Government Final Consumption Expenditure 6.9 0.3 10.9 4.0 1.0 15.5 7.7 1.7 7.8 10.0
Capital Formation -0.5 23.4 -8.7 31.6 8.1 -5.3 29.9 5.4 15.1 23.8
Exports 6.7 -2.7 -7.8 21.0 -4.2 8.5 -1.1 11.3 9.0 6.6
Imports 1.7 1.6 -8.1 22.5 0.2 4.9 5.4 8.7 14.0 16.2
AHFFb 4.7 3.2 -0.7 -0.2 2.7 2.8 1.1 1.6 0.1 -4.4
Industry 5.8 4.8 -1.9 11.6 2.3 7.3 9.3 7.9 6.0 8.7
Services 7.6 4.0 3.4 7.2 5.1 7.4 7.2 5.9 6.8 7.9
Average Inflationc 2.9 8.3 4.1 3.9 4.6 3.2 3.0 4.1 1.4 1.1
Budget Surplus/Deficit (PHP Bn) -12.4 -68.1 -298.5 -314.4 -197.7 -242.8 -164.1 -73.1 -121.70 -112.49
PHP:USD (Average) 46.1 44.7 47.6 45.1 43.3 42.1 42.5 44.4 45.4 47.3
Average 91-Day T-Bill Rates (%) 3.4 5.2 4.0 3.7 1.4 1.6 0.3 1.2 1.8 1.6
Source: Philippine Statistics Authority, Bangko Sentral ng Pilipinas, Bureau of the Treasury
aat constant 2000 prices
bAgriculture, Hunting, Forestry, Fishing
cat constant 2006 prices
3 Research & Forecast Report | 2Q 2016 | Colliers International
OFW Remittances*
*as of May 2016
Source: Bangko Sentral ng Pilipinas
Remittances from OFWs for the first five months of the
year reached USD12 billion, up 2.7% year-on-year. The
bulk of the remittances came from the United States,
Saudi Arabia, the United Arab Emirates, Singapore,
Japan, and Qatar. The central bank attributed the
continued growth in remittances to steady inflows from
land-based OFWs; initiatives of banks and non-bank
remittance service providers to expand their international
and domestic market coverage; and sustained demand
for OFWs.
Foreign direct investments (FDI) for the first four months
of the year totaled USD3.5 billion, almost triple the
USD1.23 billion in FDI inflows posted during the same
period in 2015. The fresh investments were infused
mainly to finance and insurance; construction;
accommodation and food service; real estate; and
manufacturing activities.
The country’s economy is generally believed to have
grown by at least 7% in the second quarter owing to the
additional boost provided by election spending which
usually peaks in April, a month prior to elections. But the
country’s economic managers have reduced the 2016
GDP growth target to 6-7% from the previous 6.8-7.8%
goals set by the Aquino administration as they expect
slower growth for the second half of the year. The inter-
agency Development Budget Coordination Committee
(DBCC) said the drag will come from weak agricultural
output, dampened external demand, and the tapering-off
of election-related spending.
Strong macroeconomic fundamentals continue to push
the demand for real estate loans, with banks’ exposure in
the property market growing to PHP1.331 trillion as of
March 2016 from PHP1.09 trillion in the same period the
previous year. Real estate loans for commercial use
account for 65% of the total or PHP869 billion while
residential loans represent the remaining 35% or
PHP462 billion.
Housing licenses continue to rebound
Applications for licenses to sell for housing continued to
increase in 2016, after a net decline at the end of 2015.
The total number of licenses issued by the Housing and
Land Use Regulatory Board (HLURB) for the first five
months of the year reached 144,753, up 52% from the
95,532 units issued during the same period in 2015. The
growth was driven by the more than four-fold increase in
the number of units applied for by developers to comply
with the balanced housing unit requirement of the
government. For the past two quarters, developers have
become more aggressive in complying with the
government’s requirement of developing an area for
socialized housing equivalent to at least 20% of the total
subdivision area.
Open Market Housing posted a 70% growth with the
number of new applications reaching 14,859 from 8,745.
Licenses applied for under the mid-income and
economic housing segments grew by 60% and 18%,
respectively. Mid-income housing remains a growth
area, having posted a 97% growth during the first three
months of the year. The Socialized Housing segment
recorded an 11% growth, slower than the 81% increase
posted from January to March 2016.
HLURB Licenses to Sell*
*as of May 2016
Source: Housing and Land Use Regulatory Board
-
5
10
15
20
25
30
19
95
19
96
19
97
19
98
19
99
20
00
20
01
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04
20
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20
16
bill
ion U
SD
1Q 2Q 3Q 4Q
-60%
-40%
-20%
0%
20%
40%
60%
80%
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
19
95
19
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20
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15
20
16
num
ber
of
units
1Q 2Q 3Q 4Q YoY Change (RHS)
4 Research & Forecast Report | 2Q 2016 | Colliers International
HLURB Licenses to Sell
SEGMENT JAN – MAY '15 JAN - MAY '16 % CHANGE (YoY)
Balanced Housing Compliance Units 3,142 13,542 331
Socialized Housing 9,393 10,439 11
Economic Housing 19,333 22,901 18
Mid-Income Housing 1,460 2,339 60
Open Market Housing 8,745 14,859 70
Low-Cost Condominium 2,052 1,365 -33
Mid- and High-End Condominium 22,980 37,631 64
Commercial Condominium 1,338 1,819 36
Farmlot 40 - -100
Memorial Park 19,019 26,371 39
Industrial Subdivision 126 - -100
Commercial Subdivision 103 167 62
TOTAL (Philippines) 95,532 144,753 52 Source: Housing and Land Use Regulatory Board
Applications for the mid- and high-end condominium
segment grew by 64% from a modest 18% registered
from January to March of this year while those under the
low-cost condominium category declined by a third to
1,365 units. Commercial condominium applications
reached 1,819 units from January to May of this year
from 1,338 units in the same period in 2015.
Applications under the Commercial Subdivision segment
increased from 103 to 167 while those under the
Memorial Park category grew by 39% to 26,371 units
from 19,019 units.
Republic Act No. 10884 or The Act Strengthening the
Balanced Housing Program lapsed into law on July 17,
2016. This amends the law to include provisions to define
socialized housing condominiums or medium-rise
buildings, which were previously not included. This is a
game changer since it now allows the construction of the
lower priced socialized housing in urbanized areas,
where housing has become very expensive, and
provides more affordable financing schemes for those
that qualify. Furthermore, this amendment lowers the
socialized housing development compliance for
horizontal development from 20% to 15%, while vertical
developments now have a socialized housing compliance
of 5%, regardless of whether the developer avails of
incentives. These amendments will lead to an increase in
socialized housing developments, where the housing
backlog is the largest.
Land value appreciation slows
Land Values
Source: Colliers International Philippines Research
Makati CBD land values rose by 4.2% in the second
quarter of the year, slower than the 4.6% rise posted in
1Q 2016. Fort Bonifacio values increased at a slower
3.6% to PHP460,865 per sq m. Land value appreciation
in Alabang decelerated to 3.8% from 8% in 1Q 2016.
Prices in Alabang averaged PHP132,137 per sq m.
Colliers projects land values in major business districts
will rise between 13% and 17% over the next 12 months
due to the lack of available land assets coupled by
growing investor interest.
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
20
00
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16
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16
F
4Q
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17
F
2Q
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PH
P / s
q m
Makati CBD Fort Bonifacio Ortigas
Comparative Land Values (PHP / sq m)
LOCATION 1Q 2016 2Q 2017 % CHANGE (QoQ) 2Q 2017F %CHANGE (YoY)
Makati CBD 378,000 - 668,000 394,000 - 696,000 4.23 448,000 - 793,000 13.85
Fort Bonifacio 315,000 - 574,000 326,000 - 595,000 3.60 367,000 - 670,000 12.57
Oritgas Center 140,000 - 237,000 146,000 - 246,000 4.00 164,000 - 277,000 12.64
Source: Colliers International Philippines Research
5 Research & Forecast Report | 2Q 2016 | Colliers International
Forecast New Office Supply (Net Useble Area)
LOCATION AS OF 2015* 2016F 2017F 2018F 2019F 2020F TOTAL
Makati CBD 2,853,034 13,250 37,891 29,962 40,300 183,453 3,157,891
Ortigas Center 1,380,282 14,503 60,617 45,673 236,145 - 1,737,220
Fort Bonifacio 1,170,503 271,412 345,649 224,319 176,893 29,634 2,218,411
Eastwood 300,264 - - - 28,220 - 328,484
Alabang 396,541 35,562 95,658 23,268 70,019 35,010 656,056
Mandaluyong 284,550 - 74,202 50,215 72,900 - 481,866
North EDSA-Triangle 341,855 98,559 69,787 131,098 33,666 39,894 714,861
Pasay City Reclamation 257,422 79,798 55,493 180,496 31,307 159,572 764,089
Other locations** 526,754 41,226 159,618 199,122 153,643 120,343 1,200,706
TOTAL 7,511,205 554,310 898,915 884,152 843,093 567,906 11,259,582
Source: Colliers International Philippines Research
*Revised figures
**Manila, Pasay, Quezon City, and other fringe locations
Office Buildings in fringe areas dominate completions in 2Q
An estimated 75,000 sq m of new office net usable area
(NUA) was completed in the second quarter of this year,
bringing Metro Manila’s office stock to around 7.7 million
sq m. Polaris in Alabang is the largest building completed
offering an NUA of 23,800 sq m, representing one-third
of the total additional space delivered during the period.
The completion of Ortigas Technopoint One raised
Ortigas Center’s office stock by around 14,500 sq m.
Other buildings that went online from April to June 2016
are in the peripheral areas of major business districts,
including MJ Corporate Plaza (16,600 sq m) in Chino
Roces, Makati; UP Town Corporate Center (5,400 sq m)
in Quezon City; and Starmall Las Piñas IT Hub (14,400
sq m) in Las Piñas. The delivery of additional office
space in the fringe areas indicates the growing demand
for office space outside the major business districts.
No building was completed in Fort Bonifacio in 2Q 2016,
unlike in the previous quarter where the business district
accounted for more than half of the new office space.
The completion of Metrobank Center, originally
scheduled in the second quarter, has been pushed back
to 4Q 2016. Other office buildings in Fort Bonifacio
expected to go online this year include Inoza Tower,
Vista Hub, Citibank Plaza, and W City Center. Fort
Bonifacio covers nearly half of the total amount of office
space projected to go online this year. We expect One
Felicity Center in Quezon City and Scape in Pasay, both
initially set for completion in 2Q 2016, to go online in 3Q
2016.
Moving forward, Colliers expects that the volume of new
office space completed by the end of 2016 will be much
lower than initially projected. Construction delays have
plagued many of the projects now being built, leading to
a significant decrease in actual completions. This will
mean that the market will continue to be tight until 2017,
so office developers will not need to worry much about
falling rental rates, at least for the short term.
Makati CBD vs. Metro Manila Office Stock
Source: Colliers International Philippines Research
Vacancies in Makati CBD and Fort Bonifacio continue to decline
Makati CBD’s office market remains tight due to the lack
of new supply. The vacancy rate in Makati CBD for 2Q
2016 was almost flat at 1.65%, down by 3 basis points
from the previous quarter. Vacancies in premium
buildings increased to 0.5% from 0.3% while those for
Grade B buildings rose to 1.3% from 1.1%. The
increases, however, were offset by a decline in
vacancies among Grade A buildings, including Petron
Megaplaza and Tower 6789. Overall vacancy in Makati
CBD has been declining since 4Q 2015. Colliers
expects vacancies in the business district to continue to
drop since no new office buildings are coming up until
2018, apart from the reintroduction of the renovated
Insular Life Building in 2017.
0%
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12%
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2,000,000
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sq m
)
Makati CBD Stock (LHS) Metro Manila Stock (LHS)
Total Stock YoY Change (RHS)
6 Research & Forecast Report | 2Q 2016 | Colliers International
Makati CBD Comparative Office Vacancy Rates (%)
GRADE 1Q 2016 2Q 2016 2Q 2017F
Premium 0.31 0.46 0.37
Grade A 4.58 3.71 3.02
Grade B & Below 1.05 1.25 1.02
All Grades 1.68 1.65 1.34
Source: Colliers International Philippines Research
Makati CBD Office Supply and Demand
Source: Colliers International Philippines Research
Vacancies among Fort Bonifacio office buildings dropped
from 2.6% to 1.7% due to strong leasing in Grade A
buildings such as Net Park, SM Aura, One World Square,
and Net-1 Center. The strong take-up among Grade A
buildings more than offset the rise in vacancies in Grade
B buildings. Fort Bonifacio has long established its
position as the country’s major hub for higher value
Knowledge Process Outsourcing (KPO) services. Colliers
predicts vacancies in Fort Bonifacio will remain at around
1.7% over the next twelve months due to sustained
demand from outsourcing firms, which should temper the
significant amount of additional office space being
completed in the area. In the past few years demand has
usually picked up during the second half, thus it could be
surmised that availability would continue to tighten by the
end of the year. Colliers has also observed strong pre-
leasing activity in some of the buildings that will only be
completed in the next 12 months.
Relocations from established CBDs to emerging areas
such as Aseana City are now being seen, which could
be attributed to cost considerations given the lower
rates in these emerging areas. This trend is seen to
continue moving forward.
Stable growth in rental rates across major CBDs
For the second quarter of 2016, premium rental rates in
Makati CBD reached PHP1,293 per sq m a month, up
by 1% QoQ. Rents also grew faster among Grade A
buildings, with average rent reaching PHP 919 per sq m
from PHP915 per sq m a month, representing a 0.4%
rental rate growth. Rents for Grade B buildings were
essentially flat at PHP843 per sq m. Rates in Makati
CBD continue to rise due to the lack of available office
space coupled with sustained demand from both BPO
and non-BPO companies. Colliers sees rents in the
business district rising between 5% and 10% over the
next twelve months.
In Fort Bonifacio, Grade A office rents averaged
PHP897 per sq m a month, up by 0.3% QoQ. Grade B
rents rose 1.8% QoQ to PHP782 per sq m. Colliers
expects rents in Grade A buildings to accelerate by 8%
to 10% over the twelve months.
Average rents in Grade A buildings in Ortigas Center
reached PHP667 per sq m from PHP663 in the first
quarter, representing a 0.5% growth QoQ. Grade B
rents rose 0.6%. We project that rents in Ortigas Center
will increase by 6-10% over the next twelve months.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
(100,000)
(50,000)
-
50,000
100,000
150,000
200,000
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20
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F
NU
A (
sq m
)
New Supply During Year (LHS) Take-up During Year (LHS)
Vacancy at Year-End (RHS)
Comparative Office Rental Rates (PHP / sq m / month) Makati CBD (based on net useable area)
GRADE 1Q 2016 2Q 2016 % CHANGE (QoQ) 2Q 2017F %CHANGE (YoY)
Premium 1,120 -1,430 1,130 – 1,440 0.98 1,210 – 1,540 6.86
Grade A 720 – 1,100 720 – 1,110 0.46 800 – 1,220 10.08
Grade B 590 - 840 590 - 840 0.14 620 - 880 4.49
Source: Colliers International Philippines Research
7 Research & Forecast Report | 2Q 2016 | Colliers International
Capital value growth continues to exceed rental rate growth
Premium office space in Makati CBD yielded an average
price of PHP179,163 per sq m, a 2.5% increase from to
the first quarter of 2016. Values for Grade A buildings
increased by 3% to end up with an average value of
PHP118,450 per sq m. Grade B buildings posted a 2.9%
growth QoQ to PHP87,082. Colliers sees Makati CBD
capital values growing between 5% and 13% over the
next twelve months. Grade A capital values in Fort
Bonifacio averaged PHP133,175 per sq m, up 1.4%
QoQ. The growth recorded is slower than the to 4.6%
increase in the first quarter of the year. Grade B capital
values rose 2.8% QoQ. Colliers projects capital values
for Fort Bonifacio buildings will grow between 7% and
12% over the next twelve months.
In the short term, Colliers sees both land and constructed
office space capital values increasing at a faster pace
compared to rental rates, leading to a further yield
compression. Interest rates are not seen to significantly
increase in the near future due to global conditions,
giving developers and investors continuous access to
capital for their acquisitions. This yield compression will
push developers to look into developing in emerging
CBDs such as Aseana City and Arca South, where land
values are still much lower and more attractive yield-wise
compared to Makati CBD and Fort Bonifacio.
Makati CBD Office Capital Values
Source: Colliers International Philippines Research
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onth
Premium Grade A Grade B/B-
Comparative Office Capital Values (PHP / sq m / month) Makati CBD (based on net useable area)
GRADE 1Q 2016 2Q 2016 % CHANGE (QoQ) 2Q 2017F %CHANGE (YoY)
Premium 161,000 - 188,000 165,000 - 193,000 2.51 178,000 - 208,000 7.79
Grade A 95,000 - 135,000 98,000 - 139,000 3.01 110,000 - 157,000 12.97
Grade B 69,000 - 100,000 71,000 - 103,000 2.85 75,000 - 109,000 5.11
Source: Colliers International Philippines Research
8 Research & Forecast Report | 2Q 2016 | Colliers International
Forecast Residential New Supply
LOCATION AS OF 2015 2016F 2017F 2018F 2019F TOTAL
Makati CBD 19,337 3,660 3,100 1,072 598 27,767
Rockwell 4,159 - 346 492 269 5,266
Fort Bonifacio 22,206 6,730 4,125 2,311 2,075 37,447
Ortigas 16,250 1,355 899 422 570 19,496
Eastwood 7,548 - 988 - 632 9,168
TOTAL 69,500 11,745 9,458 4,297 4,144 99,144
Source: Colliers International Philippines Research
Residential Delays in condo completions suppress supply levels
Only one of the six projects originally slated for delivery
in 2Q2016 was completed – the Alphaland Makati Tower
with 480 units. This represents a delay of more than
2,300 units from being added to the condominium stock.
The delay in completions is attributed to the acute lack of
skilled labor in construction. General contractors are
feeling the pinch in the lack of labor, given the high
number of construction projects being pursued not just in
Metro Manila but all over the country. Delays are also
seen in all property sectors, with residential and office
being the most affected. The problem in skilled labor is
also exacerbated by the desire of these laborers to seek
higher paying jobs abroad, lowering the number of
employable labor in the country.
Apart from the six projects that have been delayed, some
of the projects that are likely to be completed over the
remainder of the year are The Stratosphere and Park
terraces Tower 3 in Makati CBD; the Avida CityFlex
Towers BGC Tower 2 and The Venice Luxury
residences-Emanuele in Fort Bonifacio; and Sonata
Premiere Residences in Ortigas Center.
Makati CBD Residential Stock
Source: Colliers International Philippines Research
Makati CBD, Fort Bonifacio vacancies continue to rise
Makati CBD Comparative Resi. Vacancy Rates (%)
GRADE 1Q 2016 2Q 2016 2Q 2017F
Luxury 8.33 9.79 11.90
Others 9.76 10.41 11.84
All Grades 9.58 10.33 12.29
Source: Colliers International Philippines Research
Makati CBD Residential Vacancy
Source: Colliers International Philippines Research
During the second quarter of 2016, residential
condominium vacancies in Makati CBD grew from 9.6%
to 10.3%. The Premium segment posted the largest
increase in vacancy to 9.8% from 8.3%. Vacancies in
Grade A units also rose to 7.7% from 7.4%. Among the
major contributors to increasing vacancies in Makati
CBD is the delivery of new units in its fringes and other
major CBDs like Fort Bonifacio.
Overall vacancy in Fort Bonifacio rose to 9.2% from
8.6% as vacancies increased across all segments.
Vacancies in Premium buildings rose to 9% from 8.7%
while those in Grade A and Grade B segments rose to
8.5% and 10.5%, respectively. Colliers sees a
significant rise in vacancies in Fort Bonifacio residential
buildings given the completion of a significant amount of
condo units. We project that vacancies in Fort Bonifacio
will swell to 11.1% from 9.2% over the next twelve
months. Nearly 60% of the total number of additional
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Makati CBD Residential Vacancy
9 Research & Forecast Report | 2Q 2016 | Colliers International
units to be completed this year will be in Fort Bonifacio.
Overall vacancy in Ortigas Center dropped to 7.2% from
8.5%. Among the business districts covered, only Ortigas
Center recorded a decrease in vacancies. Take-up in
both Grade A and B segments was strong during the
period, particularly for the latter where vacancies
dropped to 6.4% from 8.3%.
Rental rates continue to soften
Prime 3BR Units Residential Rents
Source: Colliers International Philippines Research
Residential rental rates continue to soften across major
business districts. Rates in Makati CBD dropped by
1.2% to PHP858 per sq m a month from PHP869 per sq
m. The decline is slower than the 1.6% drop recorded in
1Q 2016, reflecting slow absorption amid lack of new
completions. Rents also dropped in Fort Bonifacio (-
1.5%) and Rockwell (-0.4%). Colliers sees the continued
decline in rental rates given the additional 10,000+ units
slated for completion for the remainder of the year in the
major CBDs. Over the next twelve months Colliers sees
rental rates in Makati CBD, Fort Bonifacio, and Ortigas
Center declining between 4% and 7%.
With these trends, condominium investors whose units
are now being completed face a very challenging rental
market environment. In order to assist their unit buyers
in achieving their expected rental yields, residential
condominium developers should explore creative rental
models.
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Metro Manila Residential Condominium Comparative Luxury 3BR Rental Rates (PHP / sq m / month)
LOCATION 1Q 2016 2Q 2016 % CHANGE (QoQ) 2Q 2017F %CHANGE (YoY)
Makati CBD 590 - 1,140 580 - 1,130 -1.22 550 - 1,070 -5.08
Rockwell 810 - 1,100 800 - 1,100 -0.38 790 - 1,080 -1.61
Fort Bonifacio 670 - 1,070 660 - 1,050 -1.48 620 - 990 -6.11
Source: Colliers International Philippines Research
Comparative Residential Lease Rates (High-Rise) 3BR, Semi-Furnished to Fully Furnished
LOCATION MINIMUM AVERAGE MAXIMUM
Apartment Ridge/Roxas Triangle
Rental Range (PHP / mo) 150,000 200,000 300,000
Average Size (sq m) 286 303 330
Salcedo Village
Rental Range (PHP / mo) 100,000 175,000 260,000
Average Size (sq m) 165 234 332
Legaspi Village
Rental Range (PHP / mo) 130,000 200,000 260,000
Average Size (sq m) 142 206 296
Rockwell
Rental Range (PHP / mo) 140,000 180,000 280,000
Average Size (sq m) 127 189 285
Fort Bonifacio
Rental Range (PHP / mo) 120,000 200,000 260,000
Average Size (sq m) 138 223 310 Source: Colliers International Philippines Research
10 Research & Forecast Report | 2Q 2016 | Colliers International
Makati CBD Comparative Residential Lease Rates for Exclusive Villages (PHP / mo) 3BR - 4BR, Unfurnished to Semi-Furnished
VILLAGE LOW HIGH
Forbes Park 250,000 650,000
Dasmarinas Village 230,000 600,000
Urdaneta Village 250,000 360,000
Bel-Air Village 230,000 350,000
San Lorenzo Village 140,000 250,000
Magallanes Village 120,000 250,000
Ayala Alabang Village 130,000 280,000
Source: Colliers International Philippines Research
Capital values drop across CBDs, except Ortigas Center
Capital values declined across major business districts
except Ortigas Center, where prices increased by 1.9%
QoQ, faster than the 1.5% growth posted during the first
three months of the year. Makati CBD values dropped
2.7% QoQ while Fort Bonifacio prices declined by 2.5%.
Eastwood and Rockwell also recorded lower prices
during the period under review, with their capital values
declining by 0.5% and 1.2%, respectively. Colliers sees
capital values declining slightly over the next 12 months
due to a subdued outlook on the residential market.
Prime 3BR Units Residential Capital Values
Source: Colliers International Philippines Research
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Metro Manila Residential Condominium Comparative Luxury 3BR Capital Values (PHP / sq m / month)
LOCATION 1Q 2016 2Q 2016 % CHANGE (QoQ) 2Q 2017F %CHANGE (YoY)
Makati CBD 107,000 - 197,000 104,000 - 191,000 -2.67 100,000 - 184,000 -4.02
Rockwell 122,000 - 203,000 120,000 - 200,000 -1.23 119,000 - 197,000 -1.36
Fort Bonifacio 115,000 - 185,000 112,000 - 181,000 -2.52 104,000 - 148,000 -7.01 Source: Colliers International Philippines Research
11 Research & Forecast Report | 2Q 2016 | Colliers International
Hotel and Leisure New hotel rooms raise Metro Manila’s stock to about 22,000
More than 900 new hotel rooms were completed in Metro
Manila during the first six months of 2016. The figure
accounts for nearly a third of the total number of rooms
projected to be delivered this year. The new rooms
brought the metropolitan area’s stock to around 22,000
rooms. Two new hotels, Belmont Luxury Hotel with 480
rooms and Conrad Hotel with more than 200 rooms were
completed, accounting for more than 70% of new stock
delivered during the period. The soft opening of Shangri-
La at the Fort added about 200 keys to Metro Manila’s
hotel room stock. The remaining rooms (376 rooms for
Shangi-La at the Fort and more than 100 for Conrad
Manila) should be delivered by the third quarter of 2016.
The PHP6.5 billion six-star Conrad Hotel is positioned
atop the two-level S Maison, a high-end retail complex.
The posh hotel houses four contemporary event halls
and two ballrooms spanning 4,000 sq m. It also has a
luxury spa, a 24-hour fitness center, and an outdoor
function space overlooking the city. Meanwhile, Shangri-
La at The Fort is one of the tallest towers in the country
and features Horizon Homes, a collection of distinct
homes situated on the top floors with views of the
metropolis; upscale retail shops; and Kerry Sports
Manila, a comprehensive lifestyle and leisure club. It also
features a pillarless Grand Ballroom that can
accommodate up to 1,200 guests.
Metro Manila Hotel Room Stock
Source: Colliers International Philippines Research
Other hotels likely to be completed this year are the 250-
room Seven Seas (formerly World Hotel) in Makati City;
the 440-room Seda Hotel-Vertis North in Quezon City;
and the 1,000-room Okada Manila in Entertainment City,
Parañaque.
The hotel projects to be delivered this year are a mix of
3-star and 5-star hotels. The estimated 3,100 additional
rooms expected to be completed by the end of the year
are higher than the 1,700 new rooms introduced in the
metropolis in 2015. This signifies the anticipated
increase in demand for accommodation amid the
sustained economic growth. The increase in commercial
activities has propelled the demand for business class
accommodation, especially in Metro Manila, which
accounts for 37% of the country’s economic output.
Focus on New Hotel Room Supply
Source: Colliers International Philippines Research
Occupancy down despite rise in tourist arrivals, receipts
Foreign tourist arrivals to the country during the first five
months of the year reached 2.52 million, up 14% from
2.22 million in the same period a year ago. South Korea
remained the country’s largest market with 576,332
arrivals, accounting for 23% of total foreign visitors.
Other major tourism markets include the United States,
China, Japan, Australia, Taiwan, and Canada. Among
the top contributors to foreign arrivals, China recorded
the highest growth of 81% with 285,348 visiting the
country from January to May 2016 despite an economic
slowdown. China remains as the world’s largest source
of tourists and statistics indicate that Chinese are
increasingly venturing to other parts of Asia, including
the Philippines.
Tourism receipts for the period totaled PHP106.6 billion,
13.5 % higher than the PHP93.9 billion posted in the
same period in 2015. The Average Daily Expenditure
(ADE) of a visitor in May 2016 rose by about a fifth to
PHP5,580.
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2015 2016F 2017F 2018F 2019F 2020F
Number of Hotel Rooms
12 Research & Forecast Report | 2Q 2016 | Colliers International
Visitor Arrivals*
*as of May 2016 Source: Colliers International Philippines Research
Despite the higher tourist arrivals and expenditures,
occupancy rates in Metro Manila declined slightly to 69%
from 70% in the second half of 2015. Occupancy rates
were partly fueled by the hosting of two major tourism
events – the ASEAN Tourism Forum which brought in an
estimated 1,600 delegates and Routes Asia, one of the
biggest conventions for aviation executives around the
globe that hosted more than 1,000 delegates. Election-
related spending also had a positive impact on hotel
occupancy during the period as major political parties
mounted rallies across Metro Manila, bringing in their
allies from other parts of the country. The hotly-
contested presidential elections also attracted foreign
media personnel and poll watchers, which partly raised
hotel occupancy in Metro Manila and other key cities
across the Philippines. These events, however, failed to
offset the increase in the number of hotel rooms in the
metropolis.
Improved infrastructure to sustain tourism growth
The new administration has pledged to prioritize the
bidding for the five airports as these were among the
public-private partnership (PPP) projects that were
stalled under the previous administration. The airport O &
M projects will cover the operation and maintenance of
five regional airports in Bohol, Cagayan de Oro, Davao,
Bacolod, and Iloilo. The private partners for the airport
PPP projects will provide the capital investments required
to upgrade the capacities of the airports in terms of
passengers and freight. With upgraded regional airports,
foreign tourists will no longer have to pass through the
overstretched Ninoy Aquino International Airport (NAIA)
to visit scenic spots or do business in the South. This will
not only ease foot traffic at NAIA and decongest the
country’s capital (about 70% of all arrivals still come
through Manila), but will also drive growth towards other
regional centers. This should provide the impetus for
investors to build more hotels and other tourism-related
establishments to absorb the influx of both local and
foreign tourists. However, this will take years to
implement, so tourism growth will be suppressed until
these issues are addressed.
International tourist arrivals have steadily been growing
since 2010 and the Philippines has the potential to
become a major tourist destination in the region but the
country lacks the necessary infrastructure to compete
with other ASEAN destinations and attract more tourists,
especially the high-spending ones. The development of
the regional airports is a crucial first step in ensuring
that the Philippines has adequate infrastructure to
absorb the targeted 6.5 million international visitors this
year and the projected 12 million foreign arrivals by
2022.
The country has been benefiting from cheaper cost of
travel around the region coupled by Asians’ rising
discretionary incomes. The Philippine tourism sector will
also gain from the ASEAN bloc’s air transport deals with
Russia, China, Japan, South Korea and the European
Union (EU). The hosting of the Miss Universe pageant
in January 2017 is likely to raise tourist arrivals and
hotel occupancy rates in Metro Manila particularly in the
Bay area.
The overall increase in tourism and the improvement of
international airports outside of Metro Manila will lead to
an increase in hotel demand, but not necessarily for
Metro Manila hotels. The improvement in airport
infrastructure in the regional destinations will remove the
necessity for a pitstop in Metro Manila, leading to a
decline in occupancy rates in the capital. Furthermore,
the current clampdown on spurious spending in
mainland China has resulted in a severe decline in
revenues for the new casinos built in the Manila Bay
Area. These casinos were built on the thesis that the
mainland Chinese high rollers will spill over from Macau;
unfortunately with the Chinese government strictly
monitoring gambling activity, these casinos will have to
contend to lower revenues and occupancy rates. More
than two-thirds of the additional hotel rooms expected to
be completed till end-2018 will come from casino hotel
projects which could further depress occupancy rates in
Metro Manila.
Colliers sees hotel occupancy rates in Metro Manila
stabilizing between 60% and 70% over the next twelve
months, given the projected completions especially in
the Bay area.
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13 Research & Forecast Report | 2Q 2016 | Colliers International
Industrial Number of manufacturing ecozones up
As of 1H 2016, there are 195 manufacturing economic
zones in the Philippines, up from 187 in the second half
of last year. The Philippine Economic Zone Authority
(PEZA)-registered property was almost flat at 58,430 ha
from 58,000 ha in 2H 2015. PEZA data showed that
there are eight new manufacturing zones added to the
country’s industrial stock, including EDAMPI Industrial
Park in Cavite and First Philippine Industrial Park lll in
Batangas. Both are currently classified as developments-
in-progress.
Total industrial stock in the Cavite-Laguna-Batangas
area reached 6,898 ha as of 2H 2016, a mere 1%
increase HoH. Colliers sees supply in Cavite, Laguna,
and Batangas increasing over the near- to medium-term
due to the government’s push to attract more
manufacturing investments . Manufacturing is a major
job-generating sector and promoting it is a major plank of
the current administration’s economic agenda to
generate more employment opportunities in the
countryside.
The Cavite-Laguna-Batangas area remains the country’s
major industrial hub with the provinces’ manufacturing
output accounting for half of the Cavite-Laguna-
Batangas-Rizal-Quezon (CALABARZON) region’s gross
domestic product (GDP). Aside from Japanese and
Chinese investors’ decision to transfer manufacturing
operations to the Philippines from China, the
CALABARZON region will also benefit from the growing
interest among Taipei-based manufacturing firms to put
up facilities in the country. Also crucial in funneling
manufacturing investments to CALABAZON is the revival
of a rail cargo between the ports of Manila and an inland
container terminal facility in Laguna. International
Container Terminal Services, Inc. (ICTSI) is partnering
with MRAIL, the railway subsidiary of Manila Electric Co
(Meralco) for the PHP10 billion project. The project is
likely to get approval from the government as it is in line
with the current administration‘s goal of pursuing rail
projects in “major key-points in the country.”
Philippine Industrial Supply Stock by Region of
Highest Supply (Manufacturing)
Source: Philippine Economic Zone Authority
Industrial Supply Stock (Manufacturing)*
Region IV-A 2H 2015 1H 2016 Change (HoH)
Cavite 2,426.45 2,451.45 1.03%
Laguna 1,437.50 1,439.91 0.17%
Batangas 2,971.55 3,006.59 1.18%
TOTAL 6,835.50 6,897.95 0.91%
*PEZA accredited economic zones as of March 2016 Source: Philippine Economic Zone Authority
Industrial Vacancy Rates (Manufacturing)*
Region IV-A 2H 2015 1H 2016
Cavite 13.33% 7.93%
Laguna 1.32% 3.91%
Batangas 19.41% 18.39%
TOTAL 11.29% 10.09% *PEZA accredited economic zones as of March 2016 Source: Colliers International Philippines Research
Overall vacancy improves
An insignificant increase in industrial stock coupled with
a slight uptick in demand led to a decline in the overall
vacancy of Cavite, Laguna, and Batangas industrial
stock to 10.1% as of 1H 2016 from 11.3% in the second
half of 2015. Cavite recorded the largest drop in
vacancy to 7.9% from 13.3% due to reductions in
Daiichi Industrial Park, Suntrust Ecotown Tanza, and
Cavite Technopark. Batangas recorded a slight drop in
vacancy to 18.4% from 19.4% while vacancy in Laguna
increased to 3.9% from 1.3% due to a rise in vacancy in
Carmelray Industrial Park l.
R-III 57.7%
R-IV 14.7%
R-VII 7.7%
R-X 5.8%
R-VIII 4.8%
Copyright © 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
For more information:
Julius Guevara Director Research & Advisory +632 858 9050 [email protected]
Joey Roi Bondoc Research Manager Research & Advisory +632 858 9057 [email protected]
Contributors:
Randolf Ilawan Research Assistant Research & Advisory +632 858 9068 [email protected]
David Young Managing Director Philippines +632 888 9988 [email protected]
Industrial Lease Rates (Manufacturing)*
(PHP / sq m / mo)
Region IV-A 2H 2015 1H 2016
Leasehold (Land) 59.33 63
Lease Rates (SFB**) 218 222
*Average in Cavite, Laguna, and Batangas **Standard Factory Building Source: Colliers International Philippines Research
Region IV-A Industrial Land Values
Source: Colliers International Philippines Research
Industrial land values to increase steadily
Average land leasehold rates in Cavite, Laguna, and
Batangas rose by 6.8% HoH to an estimated PHP63
from PHP59 per sq m a month. Leasehold rates for
warehouses and logistics facilities in the areas covered
increased to PHP222 from PHP218 per sq m per month.
Colliers expects industrial land and building leasehold
rates to grow over the next twelve months given the
resurgence of the manufacturing sector, especially in the
predominantly-industrial CALABARZON region. The
government’s efforts to attract more manufacturing
investments should lead to higher demand for industrial
lots and this, coupled with limited supply, should raise
land values in the region.
Key infrastructure to drive industrial sector growth
The current administration’s thrust to aggressively
implement infrastructure projects outside Metro Manila
also bodes well for the thriving industrial sector in
Cavite, Laguna, and Batangas. Better and well-
maintained roads and rail and air transport infrastructure
will ensure the seamless transport of manufactured
goods and significantly cut down the costs of doing
business in the region.
Interest in Central Luzon in terms of industrial activity
has been increasing, especially with developments such
as Clark Green City and Ayala Land’s Alviera project in
Porac, Pampanga being publicized. However because
of the location cost difference between Central Luzon
and CALABARZON, Colliers believes that low value
manufacturers will prefer the former because of the cost
advantages, while those that are in higher value
manufacturing such as electronics will continue to shift
southwards. Nevertheless, demand will continue for
industrial space, and we see more industrial-related
developments as part of township developments being
pursued by the major developers nationwide,
particularly in areas where infrastructure support is
available.
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