KMC KMCMAG SavillsGroup Research Metro

Metro Manila Office Briefing 1Q 2017 | Office Briefing

Metro Manila Office Submarkets Future Stock (2020)

DEVELOPMENT PIPELINE (2017-2020) CURRENT STOCK

MAP 1

827,617 sq m 442,901 sq m C5 CORRIDOR

606,399 sq m 396,668 sq m FRINGE

459,652 sq m GREATER ORTIGAS

1,218,447 sq m MAKATI CBD

2,044,144 sq m

796,064 sq m BAY AREA 400,860 sq m MCKINLEY

METRO MANILA CITIES QUEZON CITY SAN JUAN CITY CITY OF MANILA CITY 652,115 sq m MAKATI CITY CITY CITY CITY PARAÑAQUE CITY CITY LAS PIÑAS CITY 2 1Q 2017

Metro Manila

GRAPH 1 ■■During 1Q/2017, Metro Manila added 162,200 sq Stock & Vacancy m of office space. BGC accounted for two thirds of the new supply with the completion of W City

Metro Manila CBDs Grade A Office Stock Center and Citibank Plaza. Metro Manila CBDs Grade A Office Vacancy Rate 6,000 12% ■■Performance across submarkets was mixed. BGC, 5,000 10% Alabang and Bay Area experienced a decline in vacancies despite an influx of new supply. There 4,000 8% was impressive net take-up in these submarkets, but the overall vacancy rate in Metro Manila 3,000 6% increased to 2.4%, due to decreased occupancy '000 sq m (GLA) sq'000 m in Makati CBD and Quezon City. 2,000 4%

1,000 2% ■■Although the vacancy rate was held in single digits, rental growth continued to normalize at 3.7%

0 0% YoY. The Makati CBD maintained its premium 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F in the capital after rentals grew by 3.8% YoY –

Source: KMC Savills Research outperforming other submarkets.

GRAPH 2 ■■We are still expecting about 781,800 sq m of Supply & Take-Up additional office supply within the year. Downward pressure on rents should persist in the coming

Metro Manila CBDs Grade A Office Supply quarters, however market appetite remains largely Metro Manila CBDs Grade A Office Take-Up 1,000 intact as evidenced by the brisk absorption of new completions during the quarter.

800 ■■The better-than-expected performance in the first three months should ease concerns of double 600 digit vacancy rates in Metro Manila this year. As occupier demand tries to keep up with the '000 sq m (GLA) sq'000 m 400 upcoming supply, vacancies may stay relatively elevated in the coming years. 200

0 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

Source: KMC Savills Research

TABLE 1 BONIFACIO GLOBAL CITY Key Figures - Grade A Office 1Q 2017 Makati Ortigas BGC Alabang Quezon City Bay Area CBD Center Average net rental rate 1,027.7 906.1 656.5 628.6 718.5 701.3 (Php/sq m/month)

Upper net rental rate 1,450.0 1,200.0 825.0 675.0 800.0 750.0 (Php/sq m/month)

Vacancy rate (%) 1.9% 0.9% 1.0% 0.9% 11.9% 0.2%

Current stock (sq m) 1,080,863 1,259,930 542,610 329,508 463,183 363,175

Development pipeline 137,584 784,214 63,789 322,607 364,434 432,889 2017-2020 (sq m) * Makati CBD includes Premium Offices ** Minor changes were made in Ortigas Center’s stock and pipeline, please see page 6 kmcmaggroup.com/research | 3 Metro Manila | Office Briefing

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 1,400 14% 100

1,200 12% 80

1,000 10% 60

800 8% 40 600 6% '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 20 400 4%

0 200 2%

0 0% -20 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

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 100 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20% 80

120 10% 60

100 0%

40 '000 sq m (GLA) sq'000 m 3Q 2007 = 2007 3Q 100 80 -10%

60 -20% 20

40 -30% 0 2016 2017F 2018F 2019F 2020F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■A large amount of contract expirations at the beginning of the year resulted in negative net-take up during 1Q/2017. With no new completions, the increase in vacancy was modest, from the extremely low 0.6% in 4Q/2016 to just 1.9% in 1Q/2017.

■■In spite of this, rental rates continued to grow at a healthy rate of 3.8% YoY – beating other CBDs.

■■Given the thin pipeline and the strong demand for office space in the Makati CBD, vacancies are expected to remain low in the coming quarters.

4 1Q 2017

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 2,100 21% 500

1,800 18% 400

1,500 15% 300

1,200 12% 200 900 9% '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 100 600 6%

0 300 3%

0 0% -100 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

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 500 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20% 400

120 10% 300

100 0%

200 '000 sq m (GLA) sq'000 m 3Q 2007 = 2007 3Q 100 80 -10%

60 -20% 100

40 -30% 0 2016 2017F 2018F 2019F 2020F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■Amongst submarkets, BGC had the highest additional supply for the period, with a GLA of 107,600 sq m. Despite that, the vacancy rate remained extremely low as the additional supply was fully leased out.

■■The sustained demand, as evidenced by the tight vacancy, supported rental growth of 3.2% YoY and averaged Php 906.1 per sq m / month.

■■Given the aggressive development pipeline, a substantial increase in stock is expected in the horizon. Hence, a considerable rise in vacancy is anticipated in the coming quarters.

kmcmaggroup.com/research | 5 Metro Manila | Office Briefing

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 800 8% 120

700 7% 100

600 6% 80 500 5% 60 400 4% 40 '000 sq m (GLA) sq'000 m 300 3% (GLA) sq'000 m 20 200 2%

100 1% 0

0 0% -20 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

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 50 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20% 40

120 10% 30

100 0%

20 '000 sq m (GLA) sq'000 m 3Q 2007 = 2007 3Q 100 80 -10%

60 -20% 10

40 -30% 0 2016 2017F 2018F 2019F 2020F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■Net take-up reversed in 1Q/2017 and marginally increased vacancies to 1.0% of stock from 0.5% in the previous quarter.

■■The submarket’s performance had minimal impact as vacancies were kept historically low which supported the rental growth of 3.2% YoY.

■■New supply entering the Ortigas Center will be modest with just the completion of IBP Tower and Robinsons Cyberscape Gamma. Leasing activity in the CBD suggests that occupier demand should be able to absorb the new supply with ease.

** KMC Savills has redefined the Ortigas Center to be aligned with the estate boundaries with the introduction of Greater Ortigas which resulted in the minor changes in stock and supply.

6 1Q 2017

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 30% 180

150 500 25%

120 400 20%

90 300 15% 60 '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 200 10% 30

100 5% 0

0 0% -30 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

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 160 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20% 120

120 10%

100 0% 80 '000 sq m (GLA) sq'000 m 3Q 2007 = 2007 3Q 100 80 -10%

40 60 -20%

40 -30% 0 2016 2017F 2018F 2019F 2020F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■Alabang performed well after experiencing another quarterly decline in vacancy in spite of the additional supply from Capella’s 18,100 sq m of GLA.

■■The low vacancy has led to a healthy growth rate of 3.1% YoY with rentals averaging Php 628.6 per sq m / month during the quarter.

■■Alabang is expected to have a significant supply addition of 132,700 sq m within the next 12 months. This sizable increase in stock is estimated to push vacancies up to double digits, and should put significant downward pressure on rentals. However, the CBD’s performance in 1Q/2017 indicates that occupier demand is promising and should be able to comfortably absorb the upcoming stock.

kmcmaggroup.com/research | 7 Metro Manila | Office Briefing

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 700 35% 140

600 30% 120

100 500 25% 80 400 20% 60 300 15% '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 40 200 10% 20

100 5% 0

0 0% -20 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

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 160 Metro Manila CBDs Grade A Office Rental Index 160 30%

140 20% 120

120 10%

100 0% 80 '000 sq m (GLA) sq'000 m 3Q 2007 = 2007 3Q 100 80 -10%

40 60 -20%

40 -30% 0 2016 2017F 2018F 2019F 2020F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■Among submarkets, Quezon City had the highest vacancy rate after another quarter of subpar performance.

■■We saw a similar performance on rents after growth crawled by 0.5% YoY in 1Q/2017. Despite rentals being pulled down by vacancies, this was still an improvement from the negative growth posted in the previous two quarters.

■■The considerable volume of new supply is expected to maintain the double-digit vacancy rates in the coming quarters. However, the current pre-leasing activity in Quezon City should alleviate any abrupt rise in vacancies.

8 1Q 2017

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 700 35% 250

600 30% 200

500 25% 150

400 20% 100 300 15% '000 sq m (GLA) sq'000 m '000 sq m (GLA) sq'000 m 50 200 10%

0 100 5%

0 0% -50 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

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%

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

0 0 0% 2016 2017F 2018F 2019F 2020F 2011 2012 2013 2014 2015 2016 1Q2017 Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■■The Bay Area had the lowest vacancy rate among business districts. The completion of Filinvest Cyberzone Towers 2 and 3 added substantial amount of office space, but vacancies remained tight as the buildings were immediately leased out.

■■Occupancy remained high in this submarket, and rental rates continued to normalize after growing by 3.6% YoY.

■■We still expect double digit vacancy rates in the Bay Area this year notwithstanding the commendable market performance in 1Q/2017. Market absorption should sustain its performance in the coming quarters, but the 259,600 sq m of additional GLA in the next 12 months is still expected to weigh heavily on rentals.

kmcmaggroup.com/research | 9 Metro Manila | Office Briefing

Other Submarkets

■■Greater Ortigas currently hosts 287,700 GRAPH 27 sq m of office stock and is expected to Stock by District supply around 155,000 sq m of additional office space in the next 12 months. The McKinley Office Stock Makati Fringe Office Stock bulk of the current stock is concentrated C5 Corridor Office Stock Greater Ortigas Office Stock in the Center while 1,800 upcoming supply will be positioned in the emerging microdistricts of Greenfield 1,500 District and . 1,200

■■For the other submarkets, the first three 900 months were quiet with no new supply, but (GLA) sq'000 m 2017 is anticipated to be a busy year with 600 key additions to stock in the latter quarters. 300 Robinsons Land is projected to complete

three office buildings – Cyber Sigma in 0 McKinley, with Exxa and Zeta towers in its 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F

Bridgetowne township in the C5 Corridor. Source: KMC Savills Research In addition, Megaworld will complete its other two West Campus buildings in GRAPH 28 McKinley while Ayala Land’s two Circuit Development Pipeline by District Corporate towers will add 72,000 sq m in McKinley Office Supply Makati Fringe. Makati Fringe Office Supply C5 Corridor Office Supply Greater Ortigas Office Supply 400 ■■These submarkets are expected to grow substantially in supply in the coming

years to accommodate the expanding 300 outsourcing sector that prefer better affordability outside the established 200

business districts. (GLA) sq'000 m

100

0 2016 2017F 2018F 2019F 2020F

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 Capitol Commons, Fringe submarket. Business Park, Portico, Robinsons and the upcoming Ayala- Cybergate Center and Eton joint-venture project; Greenfield District–and the farther south are Frontera areas of Quezon City that Verde and Arco Via. surround the Ortigas Center.

10 1Q 2017

PROJECT FOCUS ARTHALAND CENTURY PACIFIC TOWER

This is the ArthaLand Century Pacific LOCATION Tower, a premium office building at the BONIFACIO GLOBAL CITY corner of 5th Avenue and 30th Street. GRADE The project is located at a prime block, Premium just across Shangri-La at the Fort, the TURNOVER DATE Central Square Mall, and near the future Q4 2017 Philippine Stock Exchange building. GROSS LEASABLE AREA 29,935 sq m The premium grade building is designed NO. OF FLOORS by SOM New York, the same group that 30 penned the One World Trade Center in FLOOR PLATE (GLA) New York and Burj Khalifa in Dubai. 1,550 sq m - Low Zone 1,600 sq m - High Zone In all aspects, this project, that is HANDOVER CONDITION designed to hold the headquarters of Warm Shell multinational companies, is fully green. It PEZA is on target to achieve dual green building Yes certification from both LEED and BERDE. 24 / 7 CAPABILITY In fact, it is already LEED pre-certified Yes Gold and won the 2016 Philippines’ BACKUP POWER Property Award as the Best Green 100% Development in the country.

GRAPH 29 12-month Supply Forecast by Building

70

60

50

40

30

'000 sq m (GLA) 20

10

0 iMet Quantum Vista Hub The Curve IBP Tower Zeta Tower Ore Central Exxa Tower World Plaza World Inoza Tower The Biopolis The Vector Three Cyber Sigma Nexgen Tower One Park Drive Menarco Tower Eastfield Center Filinvest Axis T1 Six West Campus ThreeE-ComCenter Insular Life Building Eight West Campus Alliance Global Tower One Townsquare Place City Gate Phase 1 BPO DoubleDragon Plaza T2 Plaza DoubleDragon T4 Plaza DoubleDragon DoubleDragon Plaza T1 Plaza DoubleDragon T3 Plaza DoubleDragon Ortigas Technopoint Two The PSE One at Bonifacio Circuit Corporate Center 2 Circuit Corporate Center 1 The 30th Corporate Center South Park Corporate Center ArthaLandCentury Pacific Tower Corporate Center T1 Vertis North Corporate Center T2 High StreetHigh South Corporate Plaza I Rockwell BusinessSheridan Center T1 Rockwell BusinessSheridan Center T2 2Q 3Q 4Q 1Q 2017 2018

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 Antton Nordberg Managing Director Director [email protected] Research & Consultancy [email protected]

Yves Luethi Melo Porciuncula Executive Director Executive Director Marketing and Landlord Representation Investment Services [email protected] [email protected]

Rosario Carbonell Gerold Fernando Executive Director Executive Director Tenant Representation Tenant Representation [email protected] [email protected]

Francis Fuellas Lana Osmeña Director General Manager - Cebu Property & Facilities Management [email protected] [email protected]

Since 2009, KMC Savills, Inc. has provided clients with award-winning real estate services. KMC Savills delivers world-class service strengthened with local market expertise. With over 100 employees involved directly in transactions for office, investments, industrial & hotel locators, as well as residential properties, KMC Savills is a full-service real estate firm that has successfully become the leading local firm in the Philippine real estate services industry.

This bulletin is for general information purposes only. Whilst every effort has been made to ensure its accuracy, KMC Savills accepts no liability whatsoever for any direct or consequential loss arising. The bulletin is strictly copyright and reproduction of the whole or part of it in any form is prohibited without written permission from KMC Savills. 12