Metro Manila Midyear Report 2014
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KMC MAG Group Research Metro Manila Metro Manila Midyear Report 2014 kmcmaggroup.com/research Metro Manila | Midyear Report An introduction to KMC MAG Group KMC MAG Group, Inc. is an award- firm in the Philippine real estate services Philippines. Our mission is that we aim winning real estate services firm industry. The firm provides clients with to be the only real estate services firm in headquartered in Bonifacio Global City, consistent high quality service backed with the Philippines operating with the needs the fastest growing business district strong market expertise. of foreign and local clients in mind, in Metro Manila. It is an international providing high quality services: timely, associate of Savills, one of the leading Recently, KMC MAG Group was awarded responsive, and informative – merged real estate firms in the world. as the Best Real Estate Agency Philippines with local expertise and passion. by the International Property Awards. With over 100 employees involved directly in transactions for office, investments, With offices both in Makati and Bonifacio retail, industrial & hotel locaters, as Global City, Philippines, KMC MAG well as residential properties, KMC is Group’s strengths are due to its in-depth a full service real estate firm and is market knowledge, high client satisfaction, widely recognized as the Best in Class and nationwide coverage. The company Real Estate Agency in the Philippines utilizes a process-driven team approach by the International Property Awards. to deliver superior results and value for its With services ranging from tenant clients. representation, investments to property The company’s vision is to be the most management, KMC MAG Group has preferred and leading provider of successfully become the leading local professional real estate services in the 2 2014 Contents Executive Summary 04 Economic Overview 05 Real Estate Market Overview 08 Makati 12 Bonifacio Global City 13 Ortigas Center 14 2014 Outlook 15 kmcmaggroup.com/research | 3 Metro Manila | Midyear Report Michael McCullough Managing Director Greetings from the [email protected] Managing Director The economic environment has provided Despite the reforms undertaken by to fill the housing backlog there. Even a strong foundation for the property the Aquino administration, there is though supply is constantly increasing, sector. The current economic boom and still a long way to go. Constitutional a modest market value appreciation is stable political atmosphere increased restrictions on foreign ownership limits expected to continue as demand stays the country’s creditability and attracted competition in key areas and results in high. foreign and local investors. Local poor infrastructure. Openness to foreign developers have poured a significant investments would ensure better funding Nevertheless, strong growth momentum amount of liquidity with record-breaking availability and quality for such sectors, has not had a direct impact on final capex plans, and overseas interest in the but more importantly, would increase transaction volume. On the whole, country remains very high. This will lay knowledge transfer. As overseas investors transaction volume in the Philippines is the groundwork for the country’s future actively look for opportunities in the relatively low partly because of the lack real estate markets. Philippines, foreign equity restrictions of available properties. However, there hinder potential growth. Investors have are currently a couple of interesting One could say that the Philippine now found ways to work around these assets for sale where transactions economy is poised at a unique juncture. rules usually through joint ventures and will most likely push through. Local The expected GDP growth of 6% to 7% not without significant risk. property owners may find potential in the coming years (6.4% in Q2/2014) buyers in overseas investors as the amid the slow global recovery makes fierce competition in gateway markets the country especially attractive. could cause a trickle down of excess However, the country is moving from an “Meanwhile, property capital into secondary markets such as agrarian economy to a service-oriented Manila. The large amount of capital in economy without going through the market attention the financial system has caused some industrialization process, raising doubts primary markets to become expensive, on the sustainability of that growth. The remains mainly in the whereas Manila’s high rental yield industrial phase the country was forced office sector where could provide a good alternative for to skip because of the poor level of foreign investors with well-thought-out infrastructure was replaced by the export BPOs drive the property investment strategies. of services, specifically through the business process outsourcing (IT-BPO) demand.” In spite of the strong property market industry and overseas Filipino workers growth, Manila still serves as one of the (OFW). lowest cost destinations in the Asia- Meanwhile, property market attention Pacific market. We have witnessed some We are of the opinion that it is remains mainly in the office sector record-breaking deals and are expecting sustainable, given that it is highly where BPOs drive the property demand. more to transpire. Together with the dependent on internal factors. The The increasing number of occupiers’ economic boom, the real estate sector real question is whether or not there requirements together with a shortage should further improve transparency is enough political will to maintain its of office spaces have escalated the and emphasize the current state of the current economic status which can be rental rates 7.9% YoY, illustrating a investment environment. We at KMC done through reforms and increased current landlord’s market. New supply MAG Group continue to do our best to public investments. Current efforts of will temporarily ease the chronic lack of help our clients navigate through these Good Governance and Anti-Corruption supply as 160,000 sqms was introduced favorable conditions and find a suitable as well as Public Private Partnership (PPP) within the major CBDs in the first half of real estate strategy, no matter what the reforms are laying the foundation for the year, with 140,000 sqms to follow in real estate situation is. future execution of these much needed the second. investments, ensuring the competitiveness and higher productivity later on. The popularity of the residential market Moreover, this newfound political and remains significant among the different economic stability has already been price segments. The cooling measures emphasized by the recent credit rating in Hong Kong and Singapore have upgrades given by international agencies increased overseas interest in the such as Standard and Poor’s (now BBB, market’s high-end segment while the Stable), which are also expected to have local market drives demand in other a positive impact on the property market. segments. Production is shifting towards the lower segments as developers try 4 2014 Economic Overview The global economy seems to finally be According to the National Statistical picking up in 2014. It is expected that “Despite this slight fall Coordination Board (NSCB), the the United States will lead global growth majority of GDP growth came from the as Europe continues to struggle with in GDP growth, the services and the industry sectors, which geopolitical tensions while China leads grew by 6.0% and 7.8%, respectively. the emerging markets. Speculation over Philippine economy Furthermore, the services sector, led by the US Federal Reserve’s (FED) policies, remains as one of real estate related services, contributed as the stimulus program is about to end 3.5% to overall GDP growth while and the normalization of interest rates the most promising the industry sector, which was led becomes more visible, is keeping the by manufacturing, came in second, economic spectators alert. In Asia, Japan globally.” contributing 2.6%. has been robust but their recovery might reach a critical point as the increase in GRAPH 1 consumption taxes might slow down domestic demand. However, the upward GDP Growth revisions of growth in China, where the government is looking to rebound the 10.0% stagnating housing markets through credit easing, is expected to support the 8.0% region. Amid these circumstances, the Philippines continues to be an outlier. 6.0% The Philippines’ economic performance continues as it posted a 6.4% GDP 4.0% growth rate for the 2nd quarter of 2014. The effect of supertyphoon Haiyan’s devastation last November 2013, which 2.0% decreased agricultural production and damaged critical infrastructure 0.0% in the country, slightly slowed down the economic growth in the first half of the year. However, the economy is expected to benefit from the massive Source: National Statistical Coordination Board (NSCB) reconstruction plans, amounting to 3% of the country’s GDP, by 2014-2015. TABLE 1 Despite this slight fall in GDP growth, Key Figures - Philippine Economy % the Philippine economy remains as one 2014 of the most promising globally. The 2007 2008 2009 2010 2011 2012 2013 Q2 economy is mainly driven by its favorable demographics, a continuously growing GDP 6.6 4.2 1.1 7.6 3.6 6.8 7.2 6.4 outsourcing industry, strong private consumption, and high government Private consumption 4.6 3.7 2.3 3.4 5.7 6.6 5.7 5.3 spending. These fundamentals protect Export 6.7 -2.7 -7.8 21.0 -2.8 8.5 -1.1 10.3 the country from external shocks and cushion the economic influence of the Import 1.7 1.6 -8.1 22.5 -1.0 4.9 5.4 1.4 supertyphoon. These are also expected to mitigate the effects of the FED’s Average inflation rate 2.9 8.3 4.2 3.8 4.6 3.2 3.0 4.4 reductions in quantitative easing, making Unemployment rate 7.3 7.4 7.5 7.4 7.0 7.0 7.1 7.0 the Philippines less vulnerable to capital outflows.