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Metro Manila Office Briefing 1Q 2018 | Office Briefing

Metro Manila Office Submarkets Future Stock (2021)

DEVELOPMENT PIPELINE (2018-2021) CURRENT STOCK

MAP 1

784,898 sq m 370,628 sq m C5 CORRIDOR

1,012,667 sq m 373,521 sq m FRINGE

459,652 sq m GREATER ORTIGAS

1,218,447 sq m MAKATI CBD NAIA

2,047,743 sq m

918,842 sq m BAY AREA

400,860 sq m MCKINLEY

METRO MANILA CITIES QUEZON CITY SAN JUAN CITY CITY OF MANILA CITY 567,496 sq m MAKATI CITY CITY CITY CITY PARAÑAQUE CITY CITY LAS PIÑAS CITY 2 1Q 2018

Metro Manila

GRAPH 1 ■■In 1Q/2018, around 130,100 sq m of Grade Stock & Vacancy A office space was added in Metro Manila, predominantly in BGC, the Bay Area and Quezon

Metro Manila CBDs Grade A Office Stock City. Net absorption was able to exceed new Metro Manila CBDs Grade A Office Vacancy Rate 7,000 14% supply and it resulted in a lower vacancy rate of 3.8%. All submarkets experienced declining 6,000 12% vacancies except for Quezon City, which

5,000 10% increased to 10.4% of its office stock.

4,000 8% ■■Average rents in Metro Manila continued to expand and registered growth of 3.4% YoY – '000 sq m (GLA) sq'000 m 3,000 6% buoyed by the tightening conditions in most 2,000 4% submarkets. However, the Bay Area remains to be a key outlier as average rents grew by 6.5% 1,000 2% YoY. The tight conditions in Alabang also have

0 0% accelerated rental growth to 3.8% YoY from 3.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F YoY in 4Q/2017.

Source: KMC Savills Research ■■The estimated 723,200 sq m of GLA in the GRAPH 2 coming quarters of 2018 should increase the Supply & Take-Up vacancy rate beyond the 5.0% mark by the end of the year. However, we believe this amount

Metro Manila CBDs Grade A Office Supply is still manageable given the market’s current Metro Manila CBDs Grade A Office Take-Up 1,000 performance. In addition, rental growth may not be as affected due to a changing occupier

800 mix in select submarkets such as Bay Area and Alabang.

600 ■■The offshoring and outsourcing sector is still a significant occupier of office space. However, the '000 sq m (GLA) sq'000 m 400 Philippine Offshore Gaming Operator (POGO) sector has been a rising player, as of late. We 200 believe the emergence of the POGO sector has eased risks of a potential glut in the office market. 0 As such, we expect occupier demand to remain 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F healthy even with another record year of new office supply. Source: KMC Savills Research

TABLE 1 BONIFACIO GLOBAL CITY Key Figures - Grade A Office 1Q 2018 Makati Ortigas BGC Alabang Quezon City Bay Area CBD Center Average net rental rate 1,060.2 937.8 669.1 653.0 738.2 746.8 (Php/sq m/month)

Upper net rental rate 1,500.0 1,250.0 850.0 725.0 825.0 850.0 (Php/sq m/month)

Vacancy rate (%) 2.1% 4.3% 3.4% 1.2% 10.4% 1.4%

Current stock (sq m) 1,101,074 1,566,170 558,513 401,296 543,427 591,310

Development pipeline 117,373 472,723 454,154 166,200 241,471 327,532 2018-2021 (sq m)

* Makati CBD includes Premium Offices

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Makati CBD

GRAPH 3 GRAPH 4 Stock & Vacancy Supply & Take-Up

Makati CBD Premium and Grade A Office Stock Makati CBD Premium and Grade A Office Supply Makati CBD Premium and Grade A Office Vacancy Rate Makati CBD Premium and Grade A Office Take-Up 1,500 10% 100

80 1,200 8%

60 900 6%

40 '000 sq m (GLA) sq'000 m 600 4% (GLA) sq'000 m 20

300 2% 0

0 0% -20 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F

Source: KMC Savills Research Source: KMC Savills Research

GRAPH 5 GRAPH 6 Rental Performance Development Pipeline

Makati CBD Rental Growth, YoY Makati CBD Premium and Grade A Office Rental Index 120 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20%

120 10% 80

100 0% '000 sq m (GLA) sq'000 m

3Q 2007 = 2007 3Q 100 80 -10% 40

60 -20%

40 -30% 0 2017 2018F 2019F 2020F 2021F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■Net absorption in Makati CBD recovered as vacancy rates improved to 2.1%. This was lower than 2.5% in 4Q/2017 despite having no new supply during the quarter.

■■Average rents increased to Php 1,060.2 per sq m / month in 1Q/2018 after growth accelerated to 3.2% YoY.

■■Vacancies remained tight during the quarter but the incoming supply of 53,800 sq m in the coming quarters of 2018 should ease conditions in the submarket. However, the vacancy rate is still expected to be one of the lowest among submarkets.

4 1Q 2018

Bonifacio Global City

GRAPH 7 GRAPH 8 Stock & Vacancy Supply & Take-Up

Bonifacio Global City Grade A Office Stock Bonifacio Global City Grade A Office Supply Bonifacio Global City Grade A Office Vacancy Rate Bonifacio Global City Grade A Office Take-Up 2,400 12% 400

2,000 10% 300 1,600 8%

1,200 6% 200 '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 800 4% 100 400 2%

0 0% 0 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F

Source: KMC Savills Research Source: KMC Savills Research

GRAPH 9 GRAPH 10 Rental Performance Development Pipeline

Bonifacio Global City Rental Growth, YoY Bonifacio Global City Grade A Office Rental Index 400 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20% 300

120 10%

100 0% 200 '000 sq m (GLA) sq'000 m

3Q 2007 = 2007 3Q 100 80 -10%

100 60 -20%

40 -30% 0 2017 2018F 2019F 2020F 2021F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■BGC welcomed just 38,200 sq m of new office space in 1Q/2018, but net absorption exceeded the new supply which drove down the vacancy rate to 4.3%.

■■Rentals in BGC averaged Php 937.8 per sq m / month and grew by 3.5% YoY during the quarter.

■■In the remaining months of 2018, BGC has the largest development pipeline among submarkets, pegged at around 247,100 sq m. Despite the strong take-up in past quarters, we expect incoming supply to push vacancies upward, close to double digits.

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Ortigas Center

GRAPH 11 GRAPH 12 Stock & Vacancy Supply & Take-Up

Ortigas Center Grade A Office Stock Ortigas Center Grade A Office Supply Ortigas Center Grade A Office Vacancy Rate Ortigas Center Grade A Office Take-Up 1,000 15% 300

250 800 12% 200

600 9% 150

100 '000 sq m (GLA) sq'000 m 400 6% (GLA) sq'000 m

50 200 3% 0

0 0% -50 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F

Source: KMC Savills Research Source: KMC Savills Research

GRAPH 13 GRAPH 14 Rental Performance Development Pipeline

Ortigas Center Rental Growth, YoY Ortigas Center Grade A Office Rental Index 300 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20%

120 10% 200

100 0% '000 sq m (GLA) sq'000 m

3Q 2007 = 2007 3Q 100 80 -10% 100

60 -20%

40 -30% 0 2017 2018F 2019F 2020F 2021F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■No new supply in Ortigas CBD was introduced during the quarter. Net absorption was relatively weaker but still pushed the vacancy rate down to 3.4%.

■■Average rental rates for Ortigas CBD increased by 1.9% YoY in 1Q/2018 – the slowest among the submarkets.

■■Vacancies in the submarket is expected to remain comparatively low in the rest of the quarters of 2018 as only around 43,300 sq m of office space is anticipated to be completed.

6 1Q 2018

Alabang

GRAPH 15 GRAPH 16 Stock & Vacancy Supply & Take-Up

Alabang Grade A Office Stock Alabang Grade A Office Supply Alabang Grade A Office Vacancy Rate Alabang Grade A Office Take-Up 600 18% 100

500 15% 80

400 12% 60

300 9% '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 40 200 6%

20 100 3%

0 0% 0 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F

Source: KMC Savills Research Source: KMC Savills Research

GRAPH 17 GRAPH 18 Rental Performance Development Pipeline

Alabang Rental Growth, YoY Alabang Grade A Office Rental Index 100 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20% 80

120 10% 60

100 0%

'000 sq m (GLA) sq'000 m 40

3Q 2007 = 2007 3Q 100 80 -10%

60 -20% 20

40 -30% 0 2017 2018F 2019F 2020F 2021F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■Alabang CBD had the lowest vacancy rate at 1.2% in 1Q/2018. This can be attributed to the lack of new Grade A office supply coupled with its sustained robust demand.

■■Among the submarkets we cover, Alabang still has the lowest rental rate of Php 653.0 per sq m / month. However, it achieved one of the fastest rental growth rates at 3.9% YoY given the tight market conditions.

■■Although there were no new completions during the quarter, approximately 88,400 sq m of office space is forecasted to be completed in the succeeding quarters of 2018. We still expect leasing activity to be sustained in Alabang, but vacancies may rise above 5.0% of total stock by the end of the year.

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Quezon City

GRAPH 19 GRAPH 20 Stock & Vacancy Supply & Take-Up

Quezon City Grade A Office Stock Quezon City Grade A Office Supply Quezon City Grade A Office Vacancy Rate Quezon City Grade A Office Take-Up 800 16% 210

180

600 12% 150

120

400 8% 90 '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 60

200 4% 30

0

0 0% -30 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F

Source: KMC Savills Research Source: KMC Savills Research

GRAPH 21 GRAPH 22 Rental Performance Development Pipeline

Quezon City Rental Growth, YoY Quezon City Grade A Office Rental Index 250 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20% 200

120 10% 150

100 0%

'000 sq m (GLA) sq'000 m 100

3Q 2007 = 2007 3Q 100 80 -10%

60 -20% 50

40 -30% 0 2017 2018F 2019F 2020F 2021F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■The vacancy rate in Quezon City is still the highest among submarkets at 10.4% in 1Q/2018. However, net absorption of 34,500 sq m kept vacancies at a manageable level despite the completion of the second office tower in .

■■Rental growth decelerated to 2.7% YoY as the sustained level of vacancies in Quezon City dragged the overall performance.

■■The elevated vacancies in the submarket may continue in the coming quarters given the upcoming completions in and Vertis North. However, pre-leasing activity in these townships have been promising and may indicate better market absorption rates in the coming quarters

8 1Q 2018

Bay Area

GRAPH 23 GRAPH 24 Stock & Vacancy Supply & Take-Up

Bay Area Grade A Office Stock Bay Area Grade A Office Supply Bay Area Grade A Office Vacancy Rate Bay Area Grade A Office Take-Up 1,200 12% 250

1,000 10% 200

800 8% 150

600 6% 100 '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 400 4% 50

200 2% 0

0 0% -50 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F

Source: KMC Savills Research Source: KMC Savills Research

GRAPH 25 GRAPH 26 Rental Performance Development Pipeline

Bay Area Grade A Office Rental Growth YoY Bay Area Grade A Office Rental Rates 250 1,000 20%

200 800 16%

150 600 12%

'000 sq m (GLA) sq'000 m 100 400 8% Php / sq m / month m sq / Php 50 200 4%

0 0 0% 2017 2018F 2019F 2020F 2021F 2011 2012 2013 2014 2015 2016 2017 1Q2018 Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■Robust demand in the Bay Area drove vacancies to decline to 1.4% of the total office stock in 1Q/2018 from the 3.9% last quarter.

■■Rental growth in the submarket was maintained at 6.5% YoY with average rents around Php 746.8 per sq m / month.

■■Around 141,100 sq m of new office space is expected to become online in the remaining quarters of 2018. We expect some supply pressure to ease rental growth, but this may be counteracted by the increased interest in the submarket from online gaming operators.

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Other Submarkets

■■Of the other submarkets we cover, only GRAPH 27 Greater Ortigas received new supply in Stock by District 1Q/2018. The additional 42,000 sq m of GLA increased the vacancy rate to 13.7% McKinley Office Stock Makati Fringe Office Stock C5 Corridor Office Stock Greater Ortigas Office Stock in the submarket. On the other hand, 1,800 Makati Fringe, McKinley and C5 Corridor all

experienced declining vacancies. 1,500

■■Approximately 88,800 sq m of incoming 1,200 office stock in these submarkets is estimated to be online by 2Q/2018. Zeta 900 Tower in is scheduled to add (GLA) sq'000 m 32,000 sq m in the C5 Corridor, together 600 with the 34,500 sq m of 10 West Campus 300 in McKinley West. The modest influx of

supply is expected to push vacancies 0 upwards in their respective submarkets. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F

Source: KMC Savills Research ■■Leasing activity in these submarkets continues to be strong which is reflected GRAPH 28 by the healthy absorption rates across Development Pipeline by District all submarkets. We still expect market

conditions to be sustained with the growing McKinley Office Supply Makati Fringe Office Supply C5 Corridor Office Supply Greater Ortigas Office Supply presence of offshoring and outsourcing 300 firms in these areas.

200 '000 sq m (GLA) sq'000 m

100

0 2017 2018F 2019F 2020F 2021F

Source: KMC Savills Research

Definition of other submarkets These submarkets are not included in the aggregate Metro Manila figures

MCKINLEY MAKATI FRINGE C5 CORRIDOR GREATER ORTIGAS

The McKinley submarket is , Century C5 Corridor covers a stretch The Greater Ortigas located south of Bonifacio City and , as of the C5 Road from Quezon submarket predominantly Global City, covering well as areas outside the City to Pasig City. Located covers the cities of Pasig McKinley West and McKinley Makati Central Business north are , and Mandaluyong­–which Hill. District, comprise the Makati Nuvo City, , include , Fringe submarket. Bridgetowne Business Park, Portico, Robinsons and the upcoming Ayala- Cybergate Center and Eton joint-venture project; –and the farther south are Frontera areas of Quezon City that Verde and ArcoVia. surround the Ortigas Center.

10 1Q 2018

PROJECT FOCUS JEG TOWER @ ONE ACACIA

JEG Tower boasts of its resource efficient LOCATION quality in design and construction. CEBU CITY LEED buildings use less water, energy GRADE and emits less greenhouse gases. As a PREMIUM / GRADE A friend to the environment, JDC is able TURNOVER DATE to accomplish this by having state-of- Q1 2020 the-art facilities such as 100% back-up GROSS LEASABLE AREA power with 24/7 capability and VRF air 14,409 SQ M conditioning. NO. OF FLOORS 22 JEG Tower’s architectural design is FLOOR PLATE (GLA) done by Casas architects befitting of a 1,038 SQ M pioneering structure. The cutting-edge HANDOVER CONDITION Grade A 22 stories development is a sight BARE SHELL WITH AC to behold and a face to all future estates. 24 / 7 CAPABILITY YES True to its commitment to Cebu’s green BACKUP POWER building initiative, JEG Tower is a LEED 100% pre-certified silver building.

GRAPH 29 12-month Supply Forecast by Building

100

80

60

40

'000 sq m (GLA) sq '000 20

0 SWITEX 100 West 100 Ecoprime Milestone eWestPod NEX Tower Zeta Tower Udenna Tower One Drive Park 10 West Campus SM-Keppel Tower ThreeE-ComCenter The Finance Centre Asian Century Center Century Asian Axis Tower 1 Tower Axis Filinvest 2 Tower Axis Filinvest Cyberpark TowerCyberpark Two Centris Cyberpod Five One Griffinstone Building Griffinstone One Ortigas Technopoint Two Parkway Corporate Center DoubleDragon Center East DoubleDragon Center West Ayala North Exchange 1 HQ Ayala Mall Corporate CenterAyala Corporate Mall Twenty Five SevenTwenty Mckinley Five Ayala North Exchange 1 BPO Anchor Land Corporate Center Corporate Land Anchor Robinsons Cyberscape Gamma Filinvest Filinvest Cyberzone Pasay Tower A Filinvest Filinvest Cyberzone Pasay Tower D High Street South Corporate Plaza II Vertis Corporate North Tower Center 3 2Q 3Q 4Q 1Q 2018 2019

Makati CBD BGC Ortigas Center Alabang Quezon City Bay Area Greater Ortigas C5 Makati Fringe McKinley

kmcmaggroup.com/research | 11 KMCMetro Manila Savills, | Office Briefing Inc. Please contact us for further information

Michael McCullough Fredrick Rara Managing Director Manager [email protected] Research and Consultancy [email protected]

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Rosario Carbonell Lana Osmeña Executive Director General Manager - Cebu Tenant Representation [email protected] [email protected]

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