SECOND QUARTER 2018 PHILIPPINE REPORT
CONSTRUCTION MARKET QUARTERLY UPDATE TABLE OF CONTENTS
MARKET SUMMARY 1
The Philippine Economy 1
Foreign Direct Investments 2
Philippine Construction 3
CONSTRUCTION MARKET ACTIVITY 4
Construction Market 5 Activity Cycle
COMMODITY PRICE TRENDS 6
Metal Prices 6
Steel Reinforcements 6
Crude Oil Prices 6
MATERIAL PRICE TRENDS 7
Retail Price Index 7
Currency Exchange Rates 7
CONSTRUCTION PRICES 8
PROFESSIONAL SERVICES 9
The Lerato Tower 3 Makati City MARKET SUMMARY THE PHILIPPINE ECONOMY
Philippine Economy Grows by 6.8% in Q1 2018
The Philippine economy grew by 6.8 percent in the first quarter of 2018. This was faster than the growth recorded in the same quarter of 2017. PHILIPPINES IN FIGURES
Manufacturing, Other Services, and Trade were the Population 105.8M main drivers of growth for the quarter. Among the (as of First Quarter 2018) major economic sectors, Industry recorded the fastest growth at 7.9 percent. This was followed by Services with a growth of 7.0 percent. Agriculture Gross National Income 6.40% also grew at a slower pace of 1.5 percent. (as of First Quarter 2018)
Net Primary Income increased to 4.3 percent Gross Domestic Product 6.80% during the quarter. Meanwhile, Gross National (as of First Quarter 2018) Income (GNI) posted a growth of 6.4 percent, faster than previous year’s growth of 6.3 percent. Inflation Rate 4.50% With the country’s projected population reaching (as of April 2018) 105.8 million in the first quarter of 2018, per capita GDP grew by 5.1 percent. Meanwhile, per capita Total Exports $5.51B GNI and per capita Household Final Consumption (as of March 2018) Expenditure grew by 4.7 percent and 4.0 percent, respectively. Total Imports $8.12B (as of March 2018)
GROSS DOMESTIC PRODUCT Year-on-Year Growth Rates (%), Balance of Trade $-2.61B Q1 2016-2017 and Q1 2017-2018 (as of March 2018) 8 Employment Rate 94.50% 7 (as of April 2018) 6.8 6 6.7 6.5 5 Unemployment Rate 5.50% (as of April 2018) 4 3 Underemployment Rate 17.0% 2 (as of April 2018) 1 Labor Force 60.90% 0 Participation Rate Q1 2016 Q1 2017 QQ11 2018 (as of April 2018) Data source: PSA
Data source: PSA
Rider Levett Bucknall | Construction Market Quarterly Update 2018 Second Quarter 1 MARKET SUMMARY FOREIGN DIRECT INVESTMENTS
Committed FI Reached P14.2B in TOTAL APPROVED FOREIGN Q1 2018 INVESTMENT BY COUNTRY OF INVESTOR Total foreign investments (FI) approved in the first First Quarter 2018 quarter of 2018 by the seven investment promotion agencies (IPAs), namely: Board of Investments (BOI), Clark Development Corporation (CDC), Philippine Economic Zone Authority (PEZA), and Subic Bay Japan 55.3% Metropolitan Authority (SBMA) as well as the Authority UK 10.9% of the Freeport Area of Bataan (AFAB), BOI-Autonomous Netherlands 6.2% Region of Muslim Mindanao (BOI-ARMM), and Cagayan Singapore 4.0%
Economic Zone Authority (CEZA) amounted to PhP 14.2 USA 3.9% China (PROC) 3.0% billion. This was 37.9 percent lower compared with the South Korea 2.8%
PhP 22.9 billion approved in the same period last year. Australia 2.3%
Taiwan 2.2% Among the top investing counries, during the quarter, Japan topped with PhP 7.9 billion accounting for 55.3 percent of the total FI commitments. United Kingdom and Netherlands came in second and third pledging PhP 1.5 billion and Php 878.5 million, or 10.9 percent Data source: PSA and 6.2 percent of the total approved FI, respectively.
Manufacturing bested all other industries as it stands to TOTAL APPROVED FOREIGN receive 64.1 percent of total FI pledges or PhP 9.1 billion. Administrative and Support Service Activities came in INVESTMENT BY INDUSTRY First Quarter 2018 second with investment commitments valued at PhP 1.80 billion, or 12.7 percent of the total FI. Real Estate Activities followed with PhP 1.81 billion, or 12.6 percent of the total FI.
In terms of location, majority of the approved foreign
investments in the first quarter of 2018 would be Manufacturing 64.1% intended to finance projects in CALABARZON Admin and Support 12.7% amounting to PhP 7.4 billion or 52.0 percent. This was Real Estate 12.6% followed by the National Capital Region with PhP 3.2 billion or 22.5 percent, and Northern Mindanao with PhP 1.6 billion or 11.5 percent.
Approved investments of foreign and Filipino nationals in the first quarter of 2018 grew by 52.3 percent, nearly PhP 185.0 billion from PhP 121.5 billion in the same period last year. Filipino nationals shared PhP 170.8 billion worth of investments pledges or 92.3 percent of Data source: PSA the total approved investments during the quarter.
Foreign and Filipino projects approved by the seven IPAs in the first quarter of 2018 are expected to generate 33,704 jobs. This is 38.4 percent lower compared with previous year’s projected employment. Out of these anticipated jobs, 66.9 percent or 22,535 jobs would come from projects with foreign interest.
Rider Levett Bucknall 2 Construction Market Quarterly Update 2018 Second Quarter | MARKET SUMMARY PHILIPPINE CONSTRUCTION
60 50 Public 40 30 GROSS VALUE ADDED IN Private 20 CONSTRUCTION GVA 10 0 Q1 2015 - Q1 2018 at Constant 2000 -10 Prices, in Percentage -20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 Gross Value Added (GVA) refers to the total payment to factors of production, namely: wages, interest, profits and rents. It also includes capital consumption Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 allowance and indirect taxes. It is also estimated by 2015 2015 2015 2015 2016 2016 2016 2017 2017 2017 2017 2017 2018 deducting from gross value of output the sum of Public -13.9 30 54.2 36.4 35.9 31.3 17.6 17.3 2.1 12.2 12.7 21.1 25.1 non-factor cost such as raw materials and supplies, containers and packing materials, fuel, advertising Private 10.2 10.8 3.3 7.0 7.6 8.7 17.8 4.8 13.6 0.6 0.7 1.7 6.8 and other non-industrial overhead cost.
GVA 5.1 18.8 9.6 11.6 11.2 11.8 16 9.7 9.7 4.3 4.0 4.3 9.3 Data source: PSA Construction Industry Grows by 9.3%
The Construction industry grew by 9.3 percent in the first Construction, which accounted for 20.8 percent of total quarter of 2018 with increases posted by both Private construction investments, expanded by 25.1 percent. Construction and Public Construction. The growth was Moreover, Private Construction, which accounted for slower compared with the 9.7 percent growth recorded 79.2 percent, grew by 6.8 percent. This was slower in the previous year. compared with the 13.6 percent growth in 2017.
Investments in Construction grew by 10.1 percent in the first quarter of 2018, albeit slower compared with the 11.3 percent growth in the previous year. Public
Construction Activities Rose by NUMBER OF CONSTRUCTION PROJECTS BY TYPE 2.6% First Quarter, Year 2017 and 2018
Construction activities in the country rose by 2.60 30000 25,362 25,670 percent in the first quarter of the year according to the Q1 2018 = 36,002 25000 preliminary data released by the Philippine Statistics Q1 2017 = 35,101 Authority (PSA). Total number of constructions reached 20000 36,002 during the quarter compared to 35,101 recorded 15000 in the same period in 2017. 10000 The surge in construction activities was driven by 5,587 4,997 5000 3,760 3,055 higher building permits approved from non-residential 1,293 1,379 construction and additions to existing structures. Non- 0 Residential Non-Residential Additions Alterations and residential buildings climbed by 11.8 percent from 4,997 Repairs last year to 5,587 this year. The growth was brought Data source: PSA about by the increase in number of constructions of the following: commercial buildings recorded 20.2 On the other hand, residential construction projects percent; and institutional buildings with 13.3 percent. declined by 1.2 percent to 25,632 from 25,670 reported Moreover, combined number of alterations and repairs during the same period in 2017. The following residential of existing structures increased by 23.1 percent from projects showed decrements in number: single-type 3,055 recorded last year to 3,760 this year. houses posted 1.0 percent and apartment/accessoria with 4.9 percent.
Rider Levett Bucknall | Construction Market Quarterly Update 2018 Second Quarter 3 MARKET SUMMARY PHILIPPINE CONSTRUCTION
TOP 5 REGIONS WITH Region IV-A 8,199 THE HIGHEST NUMBER OF CONSTRUCTION PROJECTS Region VII 4,333 First Quarter 2018
Data source: PSA Region III 3,589
NCR 2,890
Region I 2,762
02000 4000 6000 8000 10000
Region IV-A (CALABARZON) led the list of the top spots with 2,890 projects or 8.0 percent of the total and five regions with the highest number of construction 2,762 projects or 7.7 percent of the total, respectively. projects from January to March 2018. The region recorded 8,199 construction projects or 22.8 percent of Cavite, Cebu, and Batangas led the list of top 10 the total. Region VII (Central Visayas) ranked second provinces in terms of the number of construction with 4,333 projects or 12.0 percent of the total. projects, accounting for 20.3 percent of the total.
Region III (Central Luzon) ranked third with 3,589 The construction projects for the reference period were construction projects or equivalent of 10.0 percent equivalent to 8.569 million square meters of space and of the total, while National Capital Region (NCR) and were valued at P101.73 billion. Region I (Ilocos Region) occupied the fourth and fifth
CONSTRUCTION MARKET ACTIVITY
DISTRIBUTION OF CONSTRUCTION PROJECTS BY REGION PHILIPPINES = 36,002 First Quarter 2018 Data source: PSA CAR = 367 (1.0%) Region II = 1,040 (2.9%)
Region I = 2,762 (7.7%) Region III = 3,589 (10.0%)
Region IVA = 8,199 (22.8%) NCR = 2,890 (8.0%)
Region V = 756 (2.1%) Region IVB = 837 (2.3%)
Region VIII = 1,208 (3.4%) Region VI = 2,417 (6.7%)
Region VII = 4,333 (12.0%) CARAGA = 812 (2.3%)
Region X = 2,341 (6.5%)
Region IX = 1,137 (3.2%) Region XI = 2,252 (6.3%)
Region XII = 1,004 (2.8%)
ARMM = 58 (0.2%)
Rider Levett Bucknall 4 Construction Market Quarterly Update 2018 Second Quarter | CONSTRUCTION MARKET ACTIVITY CONSTRUCTION MARKET ACTIVITY CYCLE
RLB CONSTRUCTION MARKET ACTIVITY CYCLE First Quarter Activity within the construction industry traditionally has been subject to volatile cyclical fluctuations. PEAK The RLB Construction Sector Activity Cycle represents DECLINE the construction development activity cycle. The chart below shows the relative level of activity for various MID sectors of the construction industry in each RLB Philippines’ main and satellite offices in the country.
Each sector is categorised by three positions within GROWTH the cycle; Peak, Mid and Trough. Within each position, TROUGH activity is further defined by either declining or growing within that sector.
The “up” and “down” arrows highlight the current status within the three positions of the cycle by means of the three colours identified in the cycle diagram below.
KEY CITIES HOUSES APARTMENTS OFFICES INDUSTRIAL RETAIL HOTEL
METRO MANILA
CLARK
SUBIC
LAGUNA
ILOILO
BACOLOD
BOHOL
CEBU
CAGAYAN DE ORO
DAVAO
Rider Levett Bucknall | Construction Market Quarterly Update 2018 Second Quarter 5 COMMODITY PRICE TRENDS
METAL PRICES 8000 METAL PRICES April 2017 - April 2018 7000
Data Source: World Bank and MEPS 6000
5000
4000
3000
2000
1000
0
METAL APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018
Copper 5,684 5,600 5,720 5,985 6,486 6,577 6,808 6,827 6,834 7,066 7,007 6,799 6,852
Aluminum 1,921 1,913 1,885 1,903 2,030 2,096 2,131 2,097 2,080 2,210 2,182 2,069 2,255
DATA NOT DATA NOT Steel 657 646 635 635 658 689 677 673 689 717 750 AVAILABLE AVAILABLE
800 STEEL REINFORCEMENTS 700 STEEL REINFORCEMENTS April 2017 - April 2018 600
Description: Rebar (conrete reinforcing bars) (Japan) producers’ export contracts (3 to 12 500 months terms) fob mainly to Asia, US Dollars per Tonne. 400 METAL APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018
DATA NOT DATA NOT Rebar 502 497 498 509 530 579 581 576 598 616 632 AVAILABLE AVAILABLE
CRUDE OIL PRICES
80 CRUDE OIL PRICES April 2017 - April 2018 70 Description: Crude Oil (petroleum), simple average of three spot prices; Dated Brent, West Texas 60 Intermediate, and the Dubai Fateh, US Dollars per Barrel
50
40
METAL APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018
Crude Oil 52.2 49.9 46.2 47.7 49.9 53 54.9 59.9 61.2 66.2 63.5 64.2 68.8
Rider Levett Bucknall 6 Construction Market Quarterly Update 2018 Second Quarter | MATERIAL PRICE TRENDS
RETAIL PRICE INDEX
RETAIL PRICE INDEX OF 350 SELECTED CONSTRUCTION MATERIALS IN THE 300 NATIONAL CAPITAL REGION 250
April 2017 - April 2018 200
Data Source: PSA 150
100
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APRIL MATERIALS 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018
Carpentry 157.2 157.2 157.2 157.2 158.1 158.5 158.6 159.0 159.1 159.3 159.5 161.3 162.8
Electrical 209.0 208.9 208.9 209.0 209.7 210.3 209.8 211.0 211.1 211.2 210.9 211.3 211.7
Masonry 195.5 195.4 195.4 198.2 199.1 199.4 199.0 199.5 199.5 200.1 200.3 201.0 201.5
Painting 189.0 189.0 189.5 189.9 191.0 191.0 191.0 190.9 190.7 191.0 191.1 191.8 191.9
Plumbing 169.7 169.7 169.5 169.8 169.7 169.9 170.3 170.4 170.6 170.9 170.5 171.5 172.0
Tinsmithry 146.0 146.3 146.3 146.3 146.7 146.7 146.7 147.1 147.2 147.5 147.9 148.0 148.2
Miscellaneous 289.7 289.8 292.6 295.1 298.8 301.5 304.7 307.6 310.9 312.2 312.9 313.9 313.3
CURRENCY EXCHANGE RATES
UNITS PER USD CURRENCY UNIT APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018
Philippine 1 49.7 49.87 50.47 50.58 51.17 51.07 51.80 50.37 49.92 51.42 52.03 52.20 52.00 Peso
Singapore 1 1.4 1.38 1.38 1.36 1.36 1.36 1.36 1.35 1.34 1.31 1.33 1.31 1.32 Dollar $
UK Pound 1 1.29 1.28 1.3 1.31 1.29 1.33 1.32 1.34 1.35 1.42 1.40 1.41 1.37 Sterling £
Australian 1 0.75 0.75 0.77 0.8 0.79 0.78 0.77 0.76 0.78 0.81 0.80 0.80 0.80 Dollar $
Canadian 1 1.37 1.35 1.30 1.25 1.25 1.25 1.29 1.29 1.26 1.23 1.30 1.30 1.28 Dollar $
Japanese 1 111.25 110.95 111.94 110.55 110.5 112.66 113.15 112.00 112.90 108.84 107.32 106.19 109.31 Yen •
Korean 1 1,130.10 1,123.90 1,139.60 1,119.10 1,122.80 1,146.70 1,125.00 1,082.40 1,071.40 1,071.50 1,071.00 1,066.50 1,076.20 Won
Thailand 1 34.62 34.08 33.98 33.31 33.21 33.37 33.22 32.62 32.66 31.36 31.46 31.22 31.51 Baht
Netherlands 1 1.09 1.12 1.14 1.17 1.18 1.18 1.16 1.18 1.20 1.25 1.22 1.23 1.21 Euro
Data source: IMF
Rider Levett Bucknall | Construction Market Quarterly Update 2018 Second Quarter 7 CONSTRUCTION PRICES
DEVELOPMENT TYPE LOW HIGH DEVELOPMENT TYPE LOW HIGH
OFFICE TOWERS PHP/m2 RESIDENTIAL PHP/m2
10 - 35 Storeys (NCR) 37,100 54,700 Hi-End Residential Building 38,700 71,600
10 - 35 Storeys (Province) 27,700 34,600 Mid-End Residential Building 31,600 47,800
OFFICE FIT-OUT Low-End Residential Building 30,600 36,700
Rowhouse ( 1 - 4 storeys) 42,100 49,900 OPEN PLANNED PHP/m2 Duplex 29,700 39,400 Computer Areas 18,100 20,900 Single Detached 35,000 62,400 Executive Areas and Front of 32,800 37,800 House CLUBHOUSE PHP/m2 Insurance Office, Government 18,100 20,900 Clubhouse (Premier) 136,000 307,000 Departments Clubhouse (Secondary) 54,200 71,700 Major Company Headquarters 27,100 31,400 HOTEL FIT-OUT PHP/Room Solicitors, Financiers 27,100 31,400 Three Star 2,930,000 3,250,000 OFFICE FIT-OUT Four Star 4,170,000 4,800,000 FULLY PARTITIONED PHP/m2 Five Star 5,880,000 6,480,000 Computer Areas 21,500 25,000 HOTELS incl. FF&E PHP/m2 Executive Areas and Front of 38,600 44,400 House Five (5) Star 85,000 100,000
Insurance Office, Government Villas 112,000 148,000 21,500 25,000 Departments RETAIL PHP/m2 Major Company Headquarters 33,100 38,100 Retail Strip (NCR) 50,000 66,200 Solicitors, Financiers 27,100 33,100 Shopping Malls (NCR) 38,400 69,400 OFFICE REFURBISHMENT PHP/m2 Shopping Malls (Province) 31,300 56,500 Office Typical Floor 42,600 49,000 INSTITUTIONAL PHP/m2 Office Core Upgrade 32,700 38,600 Schools 40,500 49,600 (excluding life Modernization) Hospitals with FF&E 36,700 55,500 WORKSTATION PHP/ea INDUSTRIAL PHP/m2 Call Centre 42,200 48,500 Commissary 52,700 67,300 Executive 131,000 151,000 BPO PHP/m2 Secretarial 60,300 69,300 With Fit-out Works 37,700 53,200 Technical Staff 82,700 95,100 Without Fit-out Works 28,100 47,600
Rider Levett Bucknall 8 Construction Market Quarterly Update 2018 Second Quarter | PROFESSIONAL SERVICES
QUANTITY SURVEYING SPECIAL SERVICES
• Full Quantity Surveying from start of project to finish • Financial Audit of Construction • Budgetary Estimates and Cost Estimate Preparation • Physical Audit of Construction • Preparation of Priced Bills of Quantities • Quality Audit of Construction • Bid Documentation, Bidding and Award of Contracts • Verification of Loan Amounts • Contract Documentation and Administration • Verification of Monies Spent • Project Cost Control • Contractual Advice • Financial, Physical and Quality Audit of Construction • Contractual Claims Preparation and Adjudication • Contractual Advice • Builders Quantities Preparation • Contractual Claims Preparation and Adjudication • Replacement Cost Estimates after Disaster; Fire; • Dispute Management Typhoon etc. • Builders Quantities Preparation • Expert Witness in Arbitration, and/or Litigation • Replacement Cost Estimates • Secondment of Staff • Assistance in Arbitration, and/or Litigation • Secondment of Staff
PROJECT MANAGEMENT / CONSTRUCTION MANAGEMENT
• Project / Construction Management and Supervision • Value Engineering Services • Project Close-out Services • Quality Assurance and Quality Control (QA/QC) Services
A Quarterly Publication from the Research and Development of:
Rider Levett Bucknall Philippines, Inc.
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