Metro Manila Market Update Q2 2018
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RESEARCH METRO MANILA MARKET UPDATE Q2 2018 METRO MANILA REAL ESTATE SECTOR REVIEW THE PHILIPPINES 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 Indonesia and Business Data Bank that stores all 6.0% Malaysia. 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 Singapore 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 METRO MANILA 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 Taguig, 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 Arca South. 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 Makati CBD Fort Bonifacio Alabang total occupied space to 4.67 Million At present, Fort Bonifacio boasts of Quezon 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 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 Quezon City 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 China. 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 Mandaluyong, Pasig, and Even for emerging business districts San Juan like Arca South, which claims to be the next Bonifacio Global City 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 Serendra 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 Pasay 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 Asia in Bay Area, Pasay ramp up the Metro Manila retail Source: Manila Bulletin 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.