RESEARCH

METRO MARKET UPDATE Q2 2018

METRO MANILA REAL ESTATE SECTOR REVIEW THE SOLIDIFIES ITS POSITION AS A TOP GLOBAL INVESTMENT DESTINATION COVER | More investors expected with the ratification of the law on Ease of Doing Business

The passage of the Ease of Doing business application standards in Business (EODB) and Efficient three years’ time, with the Government Service Delivery Department of Information and (EGSD) Act of 2018 comes in Communications Technology (DICT) SNAPSHOTS timely, supporting the current administration’s 7 to 8% average being the chief implementer of the Economic Indicators economic growth for the duration of transition. Other government its 6-year term. In the second agencies requiring the same data, quarter of 2018, the country which is given during the business experienced economic resurgence application process, would simply as it outpaced wealthier Asean have to access the Philippine neighbors, such as and Business Data Bank that stores all 6.0% . With the aim of GDP the information. The DICT and maintaining the country’s good concerned agencies are tasked to Q2 2018 economic momentum and to complement the administration’s create and maintain this system. massive infrastructure programs, Taking the cue from other the EODB and EGSD Act of 2018 developed nations, such as is expected to result to an efficient 5.2% turnaround in the delivery of and New Zealand that Inflation Rate government services for both consistently ranked as the top June 2018 business and non-business-related countries in the World’s Ease of transactions, as well as avert graft Doing Business Index, the and corrupt practices. Philippines has finally started creating its own version of a The Act presents a stringent governmental action on its business friendlier and a more welcoming 2.7% application services, with a business environment for the OFW Remittances provision for automatic approvals of benefit of its citizens and investors June 2018 application processes lasting more than the prescribed period, so long as all documents required have been submitted and all applicable Continued on Page 10… fees are paid. The government is 5.9% tasked to gradually elevate its Avg. Bank Lending June 2018 Figure 1 Ease of Doing Business Historical World Ranking (Philippines)

115 113

3.36% 110 108 91-Day T-Bill June 2018 105 99 99 100 97

95 53.05 90 Avg. PHP-USD 85 June 2018 2013 2014 2015 2016 2017

Source: Trading Economics

2 SUSTAINED POSITIVE OUTLOOK FROM AN EXPANDING OFFICE SECTOR OFFICE | Demand for office space remains upbeat and unflagging

In the second quarter of 2018, the scheduled turnover of their new FIGURE 2 demand and supply indicators office space. Upcoming Supply (in sq.m.) continued to display a positive The biggest portion of this year’s Metro Manila office sector outlook. upcoming office supply will be in 1,600,000.00 The overall vacancy rate remained , which includes Bonifacio 1,400,000.00 within single digits, which has been Global City (BGC), McKinley Hill 1,200,000.00 the case since the first quarter of projects and . In BGC, 1,000,000.00 2010. Q2 2018 vacancy moved to Daiichi Properties and Development 800,000.00 4.51%, coming from 4.91% in the Inc.’s 44-storey project, The

600,000.00 first quarter of the year, indicating Finance Centre, will be adding more than 56,000 square meters of 400,000.00 continuous strong demand in the market. In addition, net absorption leasable office space to the total 200,000.00 office supply in the area. In Arca in the second quarter was - South, 5 office buildings are slated 2018 2019 2020 >2020 estimated at 20,000 square meters for turnover in the fourth quarter. of office space, which brought the CBD total occupied space to 4.67 Million At present, Fort Bonifacio boasts of City Ortigas Bay City square meters of Prime and Grade recording the largest Prime and A office space. Grade A leasable office area among the Central Business Districts (CBDs) in Metro Manila. Moreover, it Source: Santos Knight Frank Research Continuous construction and development activities is notable in is expected to further expand, Metro Manila. With new office taking advantage of the growing investor interest in the country. Real building completions slated within estate was reported to be among the year, an additional 1.5 million the top 5 destinations of TABLE 1 square meters of office space is investments in the Philippines Q2 2018 OFFICE DATA expected to add to the present during the first half of 2018. office stock. Most of the upcoming supply is pre-committed to tenants, Weighted Avg Continued on page 10. . . Vacancy who are already anticipating the Area Lease Rates Rate (PHP/sq.m./mo.)

Makati ₱1,362.05 2.52% FIGURE 3 Weighted Average Lease Rate (in PHP) and Year-on-Year Growth Taguig ₱1,099.53 3.24% Rate (in %)

1,600.00 18.00% QC ₱876.94 9.83% 7.32% 15.75% 1,400.00 12.49% 9.73% 16.00% 1,200.00 14.00% Ortigas ₱697.49 6.41% 12.00% 1,000.00 5.57% 10.00% 800.00 6.72% Alabang ₱734.85 4.89% 8.00% 600.00

6.00% Per Per Sq.M.Mo. Per Bay Area ₱767.12 1.14% 400.00 4.00% 200.00 METRO 2.00% ₱1,010.17 4.51% MANILA 0.00 0.00% Makati Fort Bonifacio Alabang Ortigas Bay Area

Source: Santos Knight Frank Research Lease Rate (PHP) Growth Rate

Source: Santos Knight Frank Research

3 THE METRO MANILA RESIDENTIAL SECTOR MAINTAINS MOMENTUM AMIDST CHALLENGES RESIDENTIAL | Rising demand for residences seen as a product of office sector growth

In the second quarter of 2018, the the Bay Area is continuously Philippine Gross Domestic Product commanding escalating prices, TABLE 2 (GDP) continued its upsurge but at notably achieving a 62.2% Year-on- Q2 2018 Residential a slower pace. Nevertheless, Year (y-o-y) growth rate, which is Condominium Sales Market residential property developers still Statistics enjoy high take-up rates as a much faster compared to the other buoyant office market resulted to a Central Business Districts in Metro Avg. parallel towering demand for Manila. This likewise raised the Units Area Monthly residences. In Makati and Taguig, prices of mid-income projects in the Sold (%) monthly take-up went up by 7 units Bay Area from the first quarter’s Take-up each. base rate of ₱123,000 per square meter to the astounding ₱165,000 Makati City An increasing number of companies 96.04% 22.77 are searching for proximate living per square meter in the second quarter. Other projects even went Taguig City spaces near their respective offices. 96.44% 17.88 These serve as employee housing as high as ₱240,000 per square for their expats from mainland meter. However, the limited supply Quezon City . A rise in demand for smaller of purchasable inventory 89.12% 31.16 units was subsequently noted. The constricted the expansion of the Ortigas* first quarter’s monthly take-up for a market, causing the decline of the 91.64% 37.83 1-bedroom unit in Makati was at 9 average monthly take-up and units per month. In the second Alabang forcing the market to buy in fringe 75.40% 9.87 quarter, it soared to 19 units per areas. month. Studio units in Taguig, on Bay Area the other hand, had a modest take- 98.52% 41.11 up of 2.8 units per month, which METRO Continued on Page 10… sky rocketed to 35.5 units per MANILA 92.77% 27.06 month in the second quarter. *Includes parts of , , and Even for emerging business districts San Juan like Arca South, which claims to be the next Source: Santos Knight Frank Research (BGC), absorption is at very high levels. Most of the projects in Arca South already reached the FIGURE 4 maximum foreign ownership limit. Indicative Average Selling Prices per Area (PHP/sq.m.) Avida Vireo Tower 2 is 67% sold, within 3 months from its launch date. Investors are expecting 600,000 immense capital appreciation as 486,000 they anticipate the same favorable 500,000 response from the market as that seen in Ayala Land’s 415,000 towers. 400,000 With its proximity to the Ninoy Aquino International Airport (NAIA), 300,000 264,000 presence of various integrated 187,000 193,000 resorts, property developments and 200,000 160,000 activity centers, the Bay Area in 165,000 became a most ideal location 100,000 for real estate investment. 109,000 89,000 Consequently, the Bay Area 68,000 81,000 82,000 achieved a 98.52% sell out rate. 0 Supported by robust demand, Makati City Taguig City Quezon City Ortigas Alabang Bay Area Source: Santos Knight Frank Research

4 NEW STRATEGIC RETAIL CONCEPTS BOOST THE METRO MANILA RETAIL SECTOR

RETAIL | Metro Manila retail sector experiences glory days with the launch of new market trends

Consumer spending continued to W Mall (Bay Area, Pasay) SM Mall of in Bay Area, Pasay ramp up the Metro Manila retail Source: reclaimed the top spot as the sector in the 2nd Quarter of 2018, biggest mall in the Philippines as causing retailers and developers to SM Supermalls added another expand in order to continually cater to the Filipino consumers. The 250,000 square meters of gross recent report of the Philippine floor area to its current 470,000 Statistics Authority showed a rise in square meters gross floor area. The consumer spending of the average MOA expansion started in 2016 to Filipino compared to the previous celebrate the mall’s 10th quarter of the year. A significant anniversary. This expansion features increase in the spending on food, a football field, Olympic-size ice beverages, clothing, and recreation skating rink, food hall, and a lot of was noted. Circuit Lane upcoming luxury and international Source: OPENINGS & EXPANSIONS brands such as Rolex and IKEA. Retail developers continue to NEW BRANDS expand their retail portfolios by launching additional shopping Influences from other countries malls, retail establishments and played a vital role in the growth of attractions around Metro Manila. the retail industry. Local and ’s ‘W Mall’ along international brands continue to in Bay Area, penetrate the market, opening up Pasay opened its doors to the stores inspired by the cultures of public last April 2018. W Mall is a other countries. The most notable 12,000-square meter neighborhood mall which houses Abenson anchor upcoming international brand is stores such as Abenson Appliance ‘Hawker Chan’ restaurant. Originally Center, Abenson Home, W called “Liao Fan Hong Kong Soya Department Store and Walter Mart Sauce Chicken Rice Noodle”, the Supermarket. hawker stall in Singapore was opened by Chan Hong Meng in Ayala Malls Circuit in the emerging 2009. It has been recognized as the Circuit Makati development starts its operations in July 2018. Ayala “Cheapest Michelin-Starred Malls Circuit dubs itself as the Ortigas & Company is adding 13,000 Restaurant in the World”. Moreover, “Speedway to Entertainment” due square meters of mixed use leasable Hawker Chan is known for serving the various innovative attractions space to Estancia Mall as part of their only roasted pork and chicken being offered such as gaming project in Ortigas dishes. The brand was brought into lounges, go-kart race track, concert Center. The expansion is set to be the Philippines by Foodee Global grounds, and cozy cinemas, placed completed by Q3 of 2019. Concepts, which is also responsible together within the former Sta. Ana for bringing in Tim Ho Wan and Race Track. Araneta Center’s Gateway Mall Llaollao. Hawker Chan unveils its Mall expansions continue to Expansion in Cubao broke ground last first branch in SM Mall of Asia in improve the shopping and dining August 7, 2018. The Gateway 2 project July and another upcoming branch experience, as physical shops is set to be a 120,000-square meter will soon open in SM North EDSA. adapt to the rise of e-commerce premier lifestyle mall at the heart of and online shopping. Robinsons Cubao in Quezon City. The prominence of Japanese and Magnolia, one of Robinsons Land’s Korean cultures has been evident in premier lifestyle malls, is currently Filinvest Development Corporation the growth of the retail sector. adding more than 10,000 square recently completed the expansion of Japanese restaurants such as meters of mixed-use leasable space Festival Supermall in Alabang. Filinvest Marugame Udon, Ikkoryu, Tsujiri, to its current 40,000 square meters added 150,000 square meters of Ippudo, Jinsei Sushi Bar & Yakitori, leasable space. The expansion is leasable space, making Festival Mall the scheduled to be completed by 2018. biggest mall in the south area.

5 and Nadai Fujisoba will soon be NEW TRENDS opened in SM North EDSA (QC), Several eyewear and optical brands Trinoma (QC), (BGC), are multiplying in different retail th (Makati), Ayala the 30 establishments and shopping malls Mall (Ortigas), Powerplant Mall within Metro Manila. Japanese (Makati), and brands, Aojo, Jins, and Owndays, (BGC), bringing in authentic Korean brand, Starfinder Optical, Japanese food culture to Filipinos. and local brands, Sunnies Specs The Corner Market Filipinos love for Korean culture Optical and Visualities by EO Source: Spot.ph have given an opportunity for compete in selling the finest and best-designed eyewear to the Korean brands and Korean-themed Filipino consumers. retail stores to come into the Filipino market as brands such as The In addition, retail developers and The Grid Saem International, Hobing, K operators introduced the “food hall” Source: Our Awesome Planet Bingsu, Sam’s Stew, and Snowbing concept, which gives mall-goers a open their stores in Trinoma (QC), new dining experience. This new (Ortigas), concept includes a wide range of food choices from different food (Makati), (QC), stalls usually owned by local and Shangri La Plaza (Ortigas) entrepreneurs, celebrities, and respectively. chefs. It caters to the increasingly changing tastes and preferences of As of the 2nd Quarter of 2018, consumers and serves the growing there are 287 upcoming brands in “foodie culture” trend of the present all of the leading retail time. “Food Halls” is a developed establishments in Metro Manila. Out version of the traditional “Food of 287 upcoming brands, 25% is Court” concept, in order to entice made up of clothing brands, jewelry consumers to visit the mall and Islas Pinas Food Hall Source: Santos Knight Frank brands, luxury timepieces, footwear dine. Another key objective is to fill brands, and apparel brands. out big spaces and decrease vacancy rates substantially. Another 35% of the upcoming brands are food businesses such as Food halls are increasingly restaurants, coffee shops, tea becoming popular in Metro Manila. shops, and specialty food stores. The trend started out with Century The rests are from other retail City Mall, with the launching of Hole categories such as entertainment, in the Wall. Another pioneer is the health clinics, salons, school and luxurious Todd English Food Hall in SM Aura Premier which is owned office supply brands, computer by American chef, Todd English. retail stores, variety stores, concept stores, collaborative spaces, sports Some of the newly opened food retail, service stores, furniture halls around the metro are the Collaborative Retail Stores (concept shops, and cosmetics and Commune Food Hall in Evia store, lifestyle boutique, general fragrance stores. Lifestyle Malls in the Alabang area, store) are likewise starting to grow The Grid in the new expansion wing in number. These so-called “retail- of Powerplant Mall in Makati, The in-a-retail” establishments are being FIGURE 5 Corner Market in the newly dubbed as the future of retail as UPCOMING RETAIL SUPPLY renovated in Ortigas, they encourage collaboration and the Islas Pinas Food Hall in the PER RETAIL CATEGORY Double Dragon Meridian Plaza in between small, pop-up, and start- the Bay Area in Pasay. up brands. An opportunity to introduce their products is An increasing number of retailers presented, giving them a chance to are noticing the prevailing trend and play with bigger brands in the are setting up new food halls for market. The collaborative retail Food mall-goers in various areas in Metro stores work by having a general Others 35% Manila. Eat Together by Vikings in 40% SM Megamall and the Town brand lease a space. & Korea Town in Vertis North in Various online shops, small Quezon City are coming soon with companies and start-up companies new dining options for the foodies in will subsequently rent a small Clothing & the metro. section within the rented mall Apparel space. 25%

Source: Santos Knight Frank Research 6 Notable examples of a collaborative (Collaborative Retail Store Sample Layout) Quezon City (QC), being the largest The Penthouse retail store are The Penthouse Source: Spot.ph city in Metro Manila in terms of located in UP Town Center, Retail area, also has the most number of Lab located in Powerplant Mall, Pop retail establishments built in the Culture in Ayala the 30th Mall, and National Capital Region. Consisting The Park: Fashion + Lifestyle in of large shopping malls such as SM Shangri La Plaza and UP Town North EDSA, TriNoMa, the newly Center. The Penthouse includes opened Vertis North, Eastwood several online brands comprised of Lifestyle Mall, Gateway Mall, UP clothing and apparel, accessories, Town Center, and Robinsons and cosmetics. Retail Lab is on the Magnolia, QC boasts of a high-end side as it features competitive average lease rate The Park: Fashion + Lifestyle international online shops and Source: Spot.ph pegged at ₱1,375.00 per square products of well-known online meter per month. fashion designers, who are looking to introduce their products to the The fast-developing Bay Area Filipino market. Pop Culture sells houses a growing number of retail chic clothing and accessory from malls, including S Maison at the online brands. The Park: Fashion + Conrad Hotel, W Mall by Walter Lifestyle serves as a stepping stone Mart, Double Dragon Meridian for start-up brands, designers, and Plaza, Blue Bay Walk, and the SM online shops as they vie against Mall of Asia. Bay Area average bigger brands. The Park: Fashion + lease rate is estimated at ₱1,325.00 per square meter per month. Lifestyle wishes to further expand Fort Bonifacio closely followed its market reach with the Ortigas as retail rents in the area Alabang has the lowest average anticipated opening of a new averaged ₱1,658.33 per square retail lease rate in all of the Manila branch in SM Mall of Asia. meter per month. Notable retail CBDs. The average retail rent in the establishments in Fort Bonifacio RETAIL LEASE RATES area is ₱1,166.67 per square meter include Bonifacio High Street retail per month. Go to shopping malls in Retail lease rates in Metro Manila strip, Central Square, Uptown Mall, Alabang is comprised of Festival remain competitive at an overall SM Aura Premier, Grand Canal Supermall, , average of ₱1,530.56 per square Mall, and Market Market. and Ayala South Park District. meter per month in the second quarter of 2018. FIGURE 6 Makati CBD, which is the address AVERAGE RETAIL LEASE RATES of Glorietta 1-5, Greenbelt 1-5, (PHP/sq.m./mo.) , Powerplant Mall in Rockwell, and the newly opened Ayala Malls Circuit in Circuit Makati, recorded the highest average lease rate, out of all the other business Alabang 1,166.67 districts, at ₱1,975.00 per square meter. Bay Area 1,325.00 Ortigas CBD came in second to Makati with an average lease rate of Fort Bonifacio 1,658.33 ₱1,683.33 per square meter per month. Some of the well-known Makati 1,975.00 shopping malls in Ortigas are Robinsons Galleria, SM Megamall, Shangri-La Plaza, The Podium, Ortigas 1,683.33 Ayala the 30th Mall, and Estancia Mall in Capitol Commons. Quezon City 1,375.00

0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00

Source: Santos Knight Frank Research

7 INDUSTRIAL DEMAND AND GOVERNMENT PROJECTS CONTRIBUTE TO INDUSTRIAL SECTOR PROGRESS INDUSTRIAL | Metro Manila Manufacturing, Logistics and Warehousing in full swing

ECONOMIC PERFORMANCE AND The transportation & storage INVESTMENTS industry received net FDI inflows of US$4.47 million compared to the The Philippine’s Gross Domestic net FDI inflows of US$ 1.05 million Product (GDP) grew by 6% as of in the same period of the previous the second quarter of 2018. The year, which is equivalent to a economy grew at a slower pace growth of more than 300%. The evidence of growing net FDI inflows compared to the 6.6% growth in in these industries shows that the the previous quarter. According to industrial sector in the Philippines Valenzuela Warehouse the Philippine Statistics Authority, remains buoyant and continues to Source: Lamudi Manufacturing, Trade, and attract several local and foreign Construction Industry were the investors. main contributors to the country’s DEMAND FOR INDUSTRIAL Valenzuela Warehouse growth. The Services Sector’s Source: Lamudi FACILITIES growth rate was tallied at 6.6%, the largest of all the three major The development of industrial economic sectors. It was followed parks, techno parks, ecozones, and by the Industry Sector, which grew warehouses in , , at a rate of 6.3%. The Agriculture, , , , and Hunting, Forestry, and Fishing have been as prevalent as the developments of (AHFF) sector continues to slow condominiums, office buildings, and down with a growth rate of 0.2% in retail establishments in Metro the second quarter of 2018. Manila. The increase in local and foreign investments and large Investor confidence in the available land mass of rural areas Philippines is still evident as the led to the development and growth ROAD INFRASTRUCTURE country’s net inflow of Foreign of economic zones. PROJECTS Direct Investments (FDI) reportedly increased in May 2018 to US$1.6 The retail sector in Metro Manila Another intended solution to the billion worth of investments from has prompted the positive supply problem is the construction performance of the industrial sector US$677 million in the same period of road infrastructures that will in the second quarter of 2018. of 2017. Meanwhile, January to Developers grew their retail lessen the distance and time from May 2018 net inflows of FDI grew at portfolios by building new shopping the production and storage sites to a rate of 49% to US$4.9 billion from malls and retail areas for better the distribution areas of goods. The US$3.3 billion in the first five competition. There is a projected “Build Build Build” project of the months of 2017. The continuous upcoming retail supply of more than current administration will improve increase in investor confidence and 500,000 square meters of gross the access to industrial areas investment inflows is due to the floor area in the form of newly built outside of Metro Manila thus economy’s consistent strong retail establishments and retail increasing the ease of doing expansions, resulting to an macroeconomic fundamentals and business in the country. This will increased demand for storage and robust performance. warehousing facilities. consequently attract local and foreign investors as well as promote According to the data presented by From searching for industrial the overall well-being of residents the Bangko Sentral ng Pilipinas, properties outside Metro Manila, and guests. there was a significant growth in the which was due to the scarcity of manufacturing industry and developable land, demand has A number of lined-up infrastructure transportation & storage industry in reverted back to properties within projects will directly benefit the the first five months of 2018. The Metro Manila. Upsurge in fuel prices industrial sector. The NLEX Harbor manufacturing industry received net forced companies to look for Link Project is a 21.65 km extension warehouses within Metro Manila to FDI inflows of US$672.46 million that runs from Avenue, lessen logistics costs. Recognizing compared to the net FDI inflows of the rise in demand, the trend Quezon City, MacArthur Highway in US$7.24 million during the same nowadays is to convert old Valenzuela City, C-3 Road in period of last year representing a buildings into industrial and storage City, to Commonwealth growth of more than 9,000%. facilities in order to cater to the Avenue, also in Quezon City. increasing requirements.

8 The 4-segment project will connect highly industrial areas within Metro Manila. The project is vital to the movement and logistics of cargo and inventory as it provides easier access to industrial facilities in the CAMANAVA area and it provides a direct route from of Manila through the (R10) in and NLEX connection.

The NLEX-SLEX Connector Road Project, on the other hand, is expected to increase efficiency in cargo logistics and present an Source: Department of Public Works and Highways alternative route for cargo trucks to access the Manila North Harbor and industrial facilities, as well as NAIA and Clark airport, without limitations due to total truck ban. LEASE RATES

Industrial facilities remain prominent in the CAMANAVA Area (Caloocan Navotas Valenzuela). It has the largest sum of vacant industrial area at more than 120,000 square meters, which is leasable at ₱250.00 to ₱530.00 per square meter per month.

There are also available industrial Source: Department of Public Works and Highways facilities in Bicutan and Bagumbayan in Taguig City with an estimated total of 17,300 square FIGURE 7 meters and leasable at ₱180.00 to AVERAGE LEASE RATES OF INDUSTRIAL ₱430.00 per square meter per PROPERTIES (PHP/sq.m./mo.) month.

Quezon City likewise has 42,200 Valenzuela 279.25 square meters of vacant industrial facilities ready for lease in Taguig 278.57 Balintawak, Cubao, Sienna, Sta. San Juan 312.50 Mesa Heights, and Mindanao Ave. Rents in these areas are at ₱140.00 QC 266.18 to ₱530.00 per square meter per Pasig 218.62 month. Paranaque 241.88 In addition, the highly urbanized Makati City has a total vacant 228.47 industrial area of approximately Manila 153.85 22,000 square meters in Pasong Tamo Extension, Guadalupe Viejo, Makati 568.16 San Lorenzo, and Chino Roces. Las Pinas 342.28 These properties can be leased for ₱450.00 to ₱825.00 per square Caloocan 256.19 meter per month. - 100.00 200.00 300.00 400.00 500.00 600.00

Source: Santos Knight Frank Research

9 Continued from Page 2 Cover Continued from Page 3 Office Continued from Page 4 Residential

alike. The passage of the EODB Constantly rising rents further Constant competition, rising and EGSD Act of 2018 is presumed supports market optimism in the demand and diminishing supply to attract even more foreign Metro Manila office sector. Overall pulled up the second quarter investors. Additional investments weighted average asking lease average selling price per square are expected to come in with rates grew 2.42% quarter-on- meter of residential apartments in China’s Belt and Road Initiative, a quarter and 10.6% year-on-year to Metro Manila. Affordable 21st century revival of the Chinese above P1,000 per square meter per condominiums posted a 21.7% y-o- , wherein Chinese month. The second quarter figure y growth in average selling prices. investors are looking beyond China was pegged at P1,010.17. Although The price range was from a low of to trade and invest. The act likewise the Bay Area has been very ₱68,000 per square meter to a high entices local populace to develop promising, Makati still holds the of ₱104,000 per square meter. In their own business ventures, taking highest asking rate of P1,362.05 addition, demand for luxury advantage of the country’s strong per square meter per month, condominiums led to a significantly consumer base, which has been followed by BGC with P1,099.53 higher y-o-y price growth of 29.5%. proportionally growing with the per square meter per month. Luxury condominium prices range entire Philippine GDP for the past from ₱154,000 to ₱486,000 per years. The Chinese gaming industry square meter. High-end and mid- continues to display strength with income projects likewise recorded The Philippine real estate industry is an increasing presence in Metro price increases of 9.3% and 11.5% constantly booming, with increasing Manila, especially in the Bay Area. respectively. commitments from offshore Nevertheless, the Business Process companies, continuous Outsourcing (BPO) industry will Around 24 projects (10,781 units) development of shopping malls and keep on driving office space take- were turned-over in the second retail strips in the countryside, and up evidenced by constant large quarter of 2018, which is 5% higher new residential project launches, commitments from IT and BPO the previous quarter’s 10,288 units. backed by numerous pipeline companies. BGC is recognized as Towers that were launched in the infrastructure projects. This is to the most dominant destination for second quarter include: Fame further continue with the passage of IT-BPO companies. Traditional Residences Tower 4 and Kai the EODB and EGSD Act of 2018. headquarters and front offices Garden Residences- Hinoki Building Moreover, land acquisition and likewise occupy a sizable portion of in Mandaluyong City, Avida Vireo development would be ideally the total office stock but are Tower 2 and Park Cascades Tower easier, paving the way for considering an upgrade to newer 2 in Taguig City, and Callisto Tower businesses in the country to expand and modern buildings available in 2 in Makati City. and extend to the countryside, and the market. thereby increasing the land value in other high potential areas. While the threat of automation challenges the BPO sector, certain firms wish to address the issue by improving employee skillset and FIGURE 8 going up the value chain with more BUSINESS CONFIDENCE INDEX advance type of services. Voice services, however, remain essential to various BPO companies, as 60.0 human interaction is preferred and 55.0 desired by majority of customers. 50.0 45.0 40.0 35.0

30.0

2Q 2018 2Q 2Q 2016 2Q 2016 4Q 2017 2Q 2017 4Q Q2 2018 Q3 2018 Forbes Media Tower Source: Bangko Sentral Ng Pilipinas (BSP) Source:

10 MANAGEMENT

Rick Santos Chairman and CEO +63 917 528 3687 Manila Office [email protected] 10th Floor, & Exchange Plaza , Makati City, 1226 OCCUPIER SERVICES AND COMMERCIAL AGENCY t: (632) 752-2580 / 848-7388 f: (632) 752-2571 Joey Radovan w: www.santos.knightfrank.ph Vice Chairman +63 920 906 7517 [email protected]

Cebu Office INVESTMENTS AND CAPITAL MARKETS Suite No. 30, Regus Business Center Calvin Javiniar th 11 Floor, AppleOne Equicom Tower Senior Director corner Biliran Road +63 917 574 3058 Business Park, 6000 [email protected] t: (6332) 318-0070 / 236-0462 VALUATIONS

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RESIDENTIAL SERVICES

Toby Miranda Assistant Manager +63 917 8077 495 [email protected]

Kim Sanchez Associate Director +63 917 537 9650 [email protected]

PROPERTY MANAGEMENT

Ed Macalintal Associate Director +63 917 533 7750 [email protected]

PROJECT MANAGEMENT

Allan Napoles Executive Director +63 917 5277638 Santos Knight Frank Research provides strategic advice, consultancy services and forecasting to a [email protected] wide range of clients worldwide including developers, investors, funding organizations, corporate institutions and the public sector. All our clients recognize the need for expert independent advice RESEARCH & CONSULTANCY customized to their specific needs. Jan Custodio Senior Director RECENT MARKET-LEADING RESEARCH PUBLICATIONS +63 917 574 3572 [email protected]

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Maki Takagaki Research Analyst [email protected] Metro Manila Metro Cebu The Wealth Report Global Cities Market Update Market Update 2018 The Report 2018 Q1 2018 2H 2017 Gelo Manansala Research Analyst [email protected] Santos Knight Frank Research Reports are available at santos.knightfrank.ph/research

© Santos Knight Frank 2017 This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Santos Knight Frank for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Santos Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Santos Knight Frank to the form and content within which it appears. Santos Knight Frank is a long-term franchise partnership registered in the Philippines with registered number A199818549. Our registered office is 10/F Ayala Tower One, Ayala Ave., Makati City where you may look at a list of members’ names.

Cover photo courtesy of Christopher Daniel A. Argamino