Colliers Radar 22 May 2018

Mequeni: Inviting National Developers to

Mequeni1: Inviting National Developers to Pampanga The government’s active infrastructure implementation and decentralisation programme is encouraging

developers to look closely at Pampanga, notably Clark Freeport and adjacent cities and municipalities. We think By Joey Roi Bondoc the Clark-Angeles-San Fernando corridor () Manager| Research has high potential to become a key property investment hub outside Metro . We see opportunities not only [email protected] for the office, residential, and retail segments, but also The Clark-Angeles-San Fernando for the leisure and industrial sectors. Given the relatively cheap developable land in the area, Colliers believes (Metro Clark) corridor in Pampanga that the development of integrated communities is a is benefiting from the government's practical route for many developers. To maximise Metro Clark’s potential, Colliers encourages both local and push to spread economic national developers to take the following steps: opportunities outside of Metro > Highlight differentiating features of townships; Manila. This is enticing national > Build three and four-star hotels and meeting, property developers to invest incentive, conference and exhibition (MICE) facilities; heavily in Metro Clark, resulting in > Explore transit-oriented, tourist-centric retail projects > Redevelop brownfield assets and old office and retail a pronounced development of buildings especially in downtown Angeles and San integrated master-planned Fernando; communities. Colliers believes that > Explore opportunities in the fringes of Metro Clark; > Develop flexible office space to accommodate firms national players need to cash in on that require smaller space; and the region's improving > Explore operation and maintenance (O&M) infrastructure backbone and opportunities involving transportation projects in Northern-Central area highlight the differentiating features Colliers also encourages local players with sizeable of their developments to maximize landbank but with limited experience in building master- planned townships to partner with national players in Metro Clark's potential and stay developing large integrated communities. We see more ahead in a fiercely competitive and aggressive development of office, condominium, and fast-evolving property market. hotels moving forward. The enhancement of the country’s infrastructure backbone should unlock land values in urban areas outside of the country’s capital including Metro Clark. This should dictate the strategies of local and national developers. And with Metro Clark being a major beneficiary of the government’s “Build, Build, Build” programme, we see more developers gravitating towards the region over the medium to long term.

1 Local dialect meaning "come here".

2 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International

Military Facility to Next CBD ...... 4 Clark cashes in on infrastructure ...... 4

On to the Next CBD ...... 4 Top BPO site in the countryside ...... 5 Horizontal outstrips Vertical: Preference for House and Lots ...... 5 Integrated Communities in the New Metropolis ...... 7 Recommendations ...... 9

Contents

3 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International

Military Facility to Next CBD 1. Clark Airport Expansion. Projected to raise the facility’s capacity from four million passengers per The Philippine government’s economic strategy is year to 12 million per annum by 2020. The expanded anchored on two main pillars - infrastructure airport is being positioned as an alternative to the implementation and decentralisation. The current congested Ninoy Aquino International Airport (NAIA) administration’s goal of spreading business opportunities in Manila and should drive the occupancy levels of outside of the country’s capital is spilling over to major hotels and sustain consumer traffic of malls in Clark, urban hubs such as Clark, a former American military Angeles, and San Fernando. facility transformed into a freeport zone that is located about 90 kilometres north of Manila. 2. Subic-Clark Cargo Railway. Connects Subic Port and Clark International Airport. It seeks to maximise the For more than 20 years, Clark’s take-off as a central currently underutilised Subic Port and decongest business district (CBD) outside Manila has been Manila Port. We see the project boosting Central constricted by the lack of supporting infrastructure, chief Luzon’s feasibility as an industrial hub and stature as among which is a high-speed train that would connect a key alternative to the -- the country's capital and Clark and its environs. corridor. The government aims to complete the railway by 2022. Among the national developers we see benefiting from the development of Clark’s infrastructure network are 3. Manila to Clark Passenger Railway (Phases 1 and 2). Filinvest Group with its planned mixed-use project within The 106-kilometre train line will link Manila to Clark. the and redevelopment of Mimosa leisure The project is expected to be completed between centre; Udenna with its integrated ; and 2021 and 2022. We see the project decongesting SM Prime with its SM City Clark complex. Ayala Land and spurring business activities in should also benefit as it has ramped up the development , and Clark which should fuel office of its Alviera township in which is five to ten space requirements and end-user demand for minutes way from Clark Freeport. Other nearby housing in Clark, Angeles, , San developments by national players that we see benefiting Fernando, and Porac. from Metro Clark’s transformation are Megaworld’s Capital Town project, Century City’s Azure Residences, 4. Stage 3. The elevated expressway reduces Torre Lorenzo's Tierra Lorenzo San Fernando in San travel time from Buendia, to Balintawak, Fernando; and Ayala’s Marquee mall and residential City from the 2 hours to 20 minutes. This developments in Angeles City. The projected surge in should hasten travel to San Fernando, Angeles City, residential demand in Metro Clark should also benefit and Clark through (NLEX) other national players such as 8990, NorthPine, Pueblo and make the corridor a viable secondary location de Oro, P.A. Alvarez, Robinsons Land, and Vista Land. for Metro Manila-based BPO operations. Skyway 3 is due to be completed in 2019. Local developers are also moving to take advantage of the planned transformation of the Clark-Angeles-San 5. NLEX-SLEX Connector Road. This is projected to Fernando corridor. Among the local players that have reduce travel time from the been aggressive in developing office towers and (SLEX) to NLEX from two hours to 20 minutes. It industrial facilities are Nepomuceno & Sons and AC aims to cut travel time between two major industrial Beautiful Islands (ACBI) Realty Development Corp, the hubs, Clark and Calamba in Laguna, from three operator of Jenra malls. hours to one hour and 40 minutes and this should benefit manufacturers with industrial facilities in both Clark cashes in on infrastructure Central and Southern Luzon. The construction of connector road will start by July and is expected to Metro Clark’s potential to become a major business hub be completed in 2021. has been constrained by the lack of infrastructure. Realising the importance of connectivity in stimulating business activities in the area, the current administration On to the Next CBD has lined up a number of projects that Colliers believes The Metro Clark property market is still dominated by should play a significant role in transforming Metro Clark local players. Except for retail where the national players into the country’s next major economic corridor. We see SM, Ayala, Robinsons, and Vista have overtaken their these infrastructure projects boosting office, residential, local counterparts in terms of leasable space, most of retail, hotel, and industrial demand in Metro Clark. office and residential projects in the corridor were built by local players. Moving forward, we see Metro Clark’s property landscape evolving and this should be enabled

4 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International by the aggressive entry of national developers facilitated than 40,000 sq m (430,000 sq ft) of BPO-ready office by the government’s plan to implement infrastructure and supply in the city with its Entec 1 and 2 buildings while decentralise. the national developers Ayala Land and Robinsons Land cover the remaining 40%, with office space offered Top BPO site in the countryside inside their respective malls – Marquee and Robinsons Angeles. The remaining 70,000 sq m (753,000 sq ft) is Clark Freeport Zone remains the major BPO hub in the mainly developed by smaller local players and occupied region. In 2016, Clark was ranked by by traditional and non-outsourcing occupants. Tholons as the 97th most attractive location for outsourcing operations in the world. However, in 2017, San Fernando accounts for about 13% of Metro Clark’s the city slipped out of the Top 100 list. Despite the office stock or about 39,000 sq m (420,000 sq ft). Most decline, Clark continues to attract major BPO locators of the office buildings are located along the busy Jose and remains a key back up site for Metro Manila-based Abad Santos Avenue or - road. The SM operations. Clark, together with Angeles and San Group’s SM Pampanga accounts for close to 10% of the Fernando, employs more than 20,000 outsourcing sub-location’s office supply. It houses Teletech, one of workers. Among the major locators in the area are the largest outsourcing firms in Pampanga. Other office Alorica, Cloudstaff, Convergys, iQor, Sutherland,TaskUs, buildings in San Fernando are the CGIC building which TATA Consultancy, Teletech, Stellar, and VXI. houses the head office of a multi-brand auto dealership firm and Freluz Building which currently houses tile and Metro Clark Supply Forecast (sq m of GLA) beauty product distribution companies, among other non-outsourcing businesses. Both buildings were LOCATION As of 2018 2019 TOTAL developed by local players. 2017 Clark Freeport 137,000 17,000 - 154,000 Office vacancy across the Clark-Angeles-San Fernando Angeles City 116,000 6,000 - 122,000 corridor stood at 26% as of end-2017 due to the recent San Fernando 39,000 - 10,000 49,000 completion of office towers in Clark Freeport. Colliers Overall 292,000 23,000 10,000 325,000 sees overall vacancy easing to 13% over the next 12 to 24 months as more BPO firms occupy space in the Source: Colliers International Philippines Research newer office space in Marquee mall, Entec, West The area hosts two of the largest universities in Central Aeropark, and Workplus Clark Mimosa buildings and Luzon; about a third of its college graduates are despite the projected completion of about 30,000 sq m Business degree holders; while nearly 40% have (323,000 sq ft) of new office space by 2019. relevant Science, Technology, Engineering and Math (STEM) degrees. At present, Metro Clark’s BPO firms Comparative Office Rental Rates (PHP/sq m/ mainly provide voice and back-office services but the month) potential shift to higher value KPO services such as animation, finance and accounting, and health LOCATION RENTS information management (HIM) should be supported by Clark Freeport PHP450-700 a large number of STEM graduates. This should help the Angeles City PHP450-550 city attract more outsourcing locators in the near term San Fernando PHP250-500 Source: Colliers International Philippines Research At present, Clark Freeport accounts for more than 40% Conversion: USD1 = PHP50 of the more than 290,000 sq m (3.1 million sq ft) of office GLA in the Clark-Angeles-San Fernando corridor. Horizontal outstrips Vertical: Among the major business hubs within Clark are Berthaphil and Philexcel Business Centres built by local Preference for House and Lots developers. Within the SM City Clark corridor are SM Horizontal Clark Tech Hubs by the national developer SM. The buildings are complemented by retail and hotel The residential landscape in Clark, Angeles, and San developments as well as a public transportation terminal. Fernando is primarily horizontal (house and lot). The Other office towers developed by national players vertical or condominium market is still in its infancy but include One and Two West Aeropark buildings by we see a more aggressive construction of vertical Udenna as well as Clark Mimosa 1 by the Filinvest projects over the next three to six years especially within Group. integrated communities that will be developed by national players. Over the near to medium term, we see In the nearby Angeles City, local players dominate. Metro Clark becoming the hotbed for condominium Nepomuceno & Sons covers almost 60% of the more development in the entire Central Luzon region as these

5 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International residential towers complement the office projects in the brand and proximity to Ayala’s retail complement pipeline. (Marquee Mall) and the Angeles exit of the North Luzon Expressway (NLEX), the major toll road connecting At present, San Fernando offers some 6,000 H&L units, Metro Manila and Northern Luzon provinces. accounting for 36% of Clark-Angeles-San Fernando area’s total H&L stock. About 75% of these units have Meanwhile, Azure North’s more than 1,600 units were been taken up. about 90% sold as of end-2017. Colliers attributes the take-up to aggressive marketing abroad as the company Meanwhile, Angeles covers the remaining 64% or almost targeted Pampanga’s overseas workers looking for 11,000 units. The city features some of the largest and viable investment options. most expensive units in the corridor (e.g. Marquee Place by the national developer Alveo, and Castellina at Among the vertical projects in the pipeline is the 23- Heritage Place by the local player Ideal & Dwell Realty). storey Tierra Lorenzo San Fernando tower developed by Some 81% of H&L units in the city are classified as national player Torre Lorenzo. Located along the Jose economic and affordable while 9% are mid-Income and Abad Santos Avenue, the project will be a condotel the remaining 10% are considered as luxury projects. (condominium operated as a hotel) with 381 units ranging from studios to two-bedroom units. The project Angeles City is the only sub-market in the entire was launched in 2017 and is due to be completed in Pampanga province that offers luxury units as it is the 2021. We believe that condotel development in Metro home of old-rich Filipino and Filipino-Chinese clans in Clark will be more popular in the near to medium term as Pampanga. The average price of H&L units declined companies cash in on the increased foreign tourist from PHP4.7 million (USD90,600) in 2013 to PHP3.6 arrivals. million (USD69,400) last year due to a more aggressive launch of economic and affordable projects which mainly Positioned as Clark’s first premium residential town is cater to families of overseas Filipino workers (OFW). Sharp Clark Hills which will be composed of five 21- storey condominiums offering a total of 508 units. This project is a joint venture between South Korea's POSCO Metro Clark House & Lot Market (Total Contract Engineering &Construction (POSCO E&C) and local Price in PHP) developer JB Cresta is estimated to cost PHP2.6-billion LOCATION Minimum Maximum Average (USD50 million). It will be completed by 2020. TCP TCP TCP Angeles City 912,000 10,944,642 3,616,374 Over the next three to six years, we see more San condominium projects being developed within Clark, Fernando 450,000 4,455,960 2,028,282 Angeles, and San Fernando by local and national developers that are currently constructing townships. Source: Colliers International Philippines Research Conversion: USD1 = PHP50 The integrated communities of national players Megaworld and Filinvest and local player Jenra Group Vertical should drive condominium supply over the medium term.

The condominium market in Metro Clark is still at its While still in its infancy, we believe that the condominium early stage. Major projects in key locations in San market in Metro Clark is starting to gain ground as the Fernando and Angeles were developed by national more affluent families and OFWs are looking for viable players while a number of residential towers in the investment options. A number of Korean, Chinese, and fringes were primarily built by local developers. American tourists that have visited Clark, Angeles, and San Fernando are now looking for condominium units to At present, there are only around 2,200 condominium live and invest in. Clark, Angeles, and San Fernando are units in Metro Clark. For comparison, this represents also part of Central Luzon, which is among the major only 2.4% of Metro Manila’s condominium stock and sources of Filipino migrant workers. about 6.5% of ’s. More than 80% of the units are in Azure North in San Fernando and Marquee Residences in Angeles City developed by Century Properties and Ayala Land, respectively. The remaining 20% are scattered across Balibago, Hensonville, and Malabanias streets in Angeles City.

The 222-unit Ayala Land’s Marquee Residences has been sold out as the project benefited from Ayala’s

6 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International

Integrated Communities in the New Metropolis National developers have been very active in building integrated communities within Metro Clark. This is partly due to the anticipated construction of passenger and cargo railways, expressways, as well as the expansion of the existing Clark Airport. Colliers believes that these projects should unlock values for parcels of land that could be developed into mixed-use communities. The development of these townships is also necessary in capturing a large fraction of the available labour pool that BPO and industrial locators could tap.

The surge in Pampanga's purchasing power has also encouraged developers to build malls and recreational facilities alongside office and residential condominium buildings. The entertainment facilities also make the Source: BCDA Pampanga townships an attractive weekend destination for Metro Manila residents. These developments should 2) Clark Global City by Udenna be sustained by institutional facilities such as schools Udenna Corporation’s 177-hectare property near the and hospitals. Colliers believes that the government's Clark International Airport is being positioned as the decentralisation thrust anchored on the implementation “” of Northern and Central Luzon. of major public infrastructure projects should entice The company is allotting more than PHP6 billion (USD developers to pursue master-planned communities in 115 million) to develop its roads and drainage pipes. and outside of Metro Clark aggressively. More than 20% of the property or 27 hectares have been developed. Udenna is planning to partner with the major 1) New Clark City by BCDA players ALI and Megaworld in developing the property. The New Clark City (NCC) is being positioned as the Philippines’ first smart and disaster-resilient metropolis. It traverses portions of Clark and Mabalacat in Pampanga and in . State-run Bases Conversion and Development Authority (BCDA) will spearhead the property’s development in partnership with private developers. According to BCDA the PHP607 billion (USD11.7 million) development covers almost 9,500 hectares, more than 40 times larger than Bonifacio Global City (BGC). The business district, once completed will accommodate up to 1.12 million residents and about 800,000 workers. Initial developments will include the establishment of two universities (Technological University of the Philippines and University of the Philippines), a 20-megawatt solar farm, a 25-hectare mixed-income housing intended for Source: Udenna Corp. industrial employees, and the 288-hectare mixed use project by Filinvest. The Filinvest Group has entered into Udenna’s property will have a saleable efficiency of 60%. a joint venture agreement with BCDA to develop a 288- The firm will build a hospital, chapel, pavilion, hectare mixed-use area within NCC, of which 100 dormitories, and a hotel. In terms of leasable space, the hectares will be allotted for industrial use. company already offers 50,000 sq m (538,000 sq ft) of office space through its One West and Two West Aeropark buildings. The construction of Three, Four, and Five West Aeropark towers has started and the buildings will add an additional 50,000 sq m (538,000 sq ft) of GLA once completed. Udenna plans to develop about 50,000 sq m (538,000 sq ft) of additional office space per annum over the next few years.

7 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International

3) Filinvest Mimosa+ Leisure City by Filinvest Group Filinvest's 201-hectare site is being positioned as a key lifestyle destination north of Metro Manila. The firm is planning to maximise the potential of the site by building a casino, lifestyle mall, five-star hotel and an events venue. The development will also feature a renovated Quest Hotel, two golf courses, and villas.

Filinvest's Workplus Building 1 is fully leased while its second office tower is due to be completed before the end of 2Q 2018. The construction of complementary retail and residential facilities will also start this year. FLI is banking on the project’s proximity to the soon-to-be modernized and expanded Clark International Airport. 5) Alviera by Ayala Land Alviera is an 1,800 hectare integrated township located in the municipality of Porac. The township is ALI’s partnership with the local developer Leonio Land. Alviera offers various residential options such as Alveo Land’s Montala Alviera and Avida Settings Alviera. About 80% of the property will be allotted for residential projects while the rest will be divided into office, retail, and industrial uses.

Alviera’s residential projects under the Alveo and Avida brands are recording strong take-up rates of nearly 90%. The industrial lots that ALI initially launched are 90% sold, compelling the developer to launch the second phase of its industrial segment. Among its industrial locators are involved in food manufacturing, motorcycle assembly, packaging, logistics and warehousing.

Source: Filinvest Land Inc.

4) SM Clark Complex by SM From a standalone retail outlet, SM Clark has expanded to become one of the major business hubs in Metro Clark. Aside from the 70,000 sq m (753,000 sq ft) retail component (SM Clark), the complex also features a 154 room Park Inn hotel, and SM Clark Techno Hubs which offer about 70,000 sq m (753,000 sq ft) of GLA. SM is planning to build a convention centre within its complex to cash in on the growing popularity of Clark as a meetings, incentives, conferences, and exhibitions (MICE) destination in Northern and Central Luzon. The construction will start this year and SM is looking at completing it in 2019.

Source: Ayala Land

Alviera also features Sandbox, an adventure destination considered an alternative to and Nuvali in Southern Luzon. Sandbox should attract more visitors from Manila and Southern Luzon once the Cavite-

8 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International

Laguna Expressway and Skyway Stage 3 are remain relevant and responsive to locators’ and completed. ALI has also signed a deal with De La Salle investors’ needs. Philippines (DLSP), through the Lasallian Institute for the Environment (LIFE) to develop the 23-has. La Salle Differentiation of townships Botanical Gardens. The firm plans to open the Alviera Major developers are now looking at Pampanga for their Country Club next year. expansion outside of the country’s capital. Over the past few years we have seen the aggressive and strategic 6) Capital Town by Megaworld acquisition of land by the national developers Ayala, Megaworld’s Capital Town covers 35.6 hectares. The Megaworld, SM, Udenna, and Filinvest within Metro project will feature residential towers, office buildings, Clark. We expect more national developers to establish retail outlets, schools, an amphitheatre, and events their footprint in the area given its potential. Thus, we venues. The project will be on the former site of see more developers responding to tenants’ and Pampanga Sugar Development Company. It is located investors’ demand by building integrated communities near the Pampanga Provincial Capitol, and is within five which improve the living and working conditions of minutes from the North Luzon Expressway and 30 employees and residents. minutes from the Clark International Airport. Apart from the typical land uses such as office, Megaworld is primarily targeting BPOs for its office residential, retail, and hotel, Colliers believes that towers and is planning initially to develop some 40,000 developers should incorporate institutional uses such as sq m (430,000 sq ft) of office GLA for outsourcing education and healthcare. Other developers have been companies. Its six hectare The Shophouse District offers more aggressive in differentiating their communities by titled commercial lots where business owners can build integrating entertainment and recreational facilities. their own shophouses or retail outlets and live or hold Moving forward, developers need to be more innovative office on the upper floors of those shophouses. to be steps ahead of the competition.

Megaworld has also launched its residential Develop more industrial space and condominium, Chelsea Parkplace. Moreover, it will build warehouses a heritage museum and the largest McDonald’s branch in the country within its San Fernando township. The growing manufacturing and export activities in the country are enticing developers to ramp up industrial estate development outside the Cavite-Laguna-Batangas area, the country’s major industrial hub and we see this spilling over to Clark and nearby locations. The first phase of Ayala Land’s (ALI) 64-hectare Alviera Industrial Park in Porac, Pampanga is 95% sold. Tenants include companies involved in food, logistics, and warehousing. Filinvest is also apportioning 100 hectares of its 288- hectare property in the New Clark City for industrial operations.

Among the major projects that Clark received in the past decade was a USD1 billion Texas Instruments chip plant. Other major industrial locators in the corridor are Nanox Philippines Incorporated, L & K Industries Philippines, Aderans Philippines Incorporated, LuenThai, Source: capitaltownpampanga.com and SMK Electronics Philippines Corporation – manufacturing clothing to electronic products. The Recommendations planned improvement of airport and cargo rail projects should further ignite interest in industrial land and Similar to Metro Manila and Cebu, the improvement of facilities in Metro Clark. Metro Clark’s infrastructure backbone should result in more businesses in the area, hence the need to develop Aside from allocating space for industrial activities, we township projects that integrate the live-work-play also encourage local and national developers in Clark to lifestyle. However, we see a more robust development of continue putting up warehouses due to growing demand these integrated communities in the near to medium for e-commerce. Colliers believes that more standard term and developers need to differentiate their offering to factory buildings are also required to support the growth

9 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International of the country's exports and imports. Clark is among the and Megaworld’s transformation of an idle textile mills country’s major export processing hubs. into a fully developed Eastwood City.

Developers should thoroughly assess the needs of future Megaworld employed this similar strategy in San industrial locators and align their future projects with the Fernando following its acquisition of the former site of possible locators’ requirements. We see potential in the Pampanga Sugar Development Company (PASUDECO) construction of warehouses, and manufacture of fast- which it plans to transform into an integrated community. moving consumer goods and packaging materials. Colliers believes that several old buildings in downtown Angeles City could be redeveloped into office towers and Build more hotels and MICE facilities lifestyle malls. In San Fernando, we see the potential in redeveloping old buildings especially along the busy Mac The Clark Airport Modernisation project is projected to Arthur and Jose Abad Santos roads. Most of these raise the facility’s capacity to 12 million from 4 million buildings are occupied by small businesses but we passengers annually. In 2017 alone, the airport believe that landlords could attract more BPO and other welcomed 1.5 million local and foreign guests, up by high-value tenants once these office towers are almost 60% from 950,000 visitors in 2016. The modernised. The retail complement should not be an modernised airport should attract more direct flights from issue as several fast-food and convenience stores are Asian and Middle Eastern countries and this should found in the area. The refurbished office buildings could result in greater foreign arrivals in Clark. We recommend also allot the ground floor for retail tenants. that developers cash in on this opportunity by building more three to four star hotels particularly as these facilities mainly cater to Japanese, Chinese, Korean, and Development of flexible office space to Taiwanese tourists, who are the major visitors to the accommodate firms that require smaller space Philippines. The robust economic growth in Northern and Central Luzon reflects not just the sustained dynamism of the Among the recently-opened hotels in Clark are the 154 BPO-led services sector but also the expansion of other room Park Inn hotel within the SM Clark complex, the key economic sub-sectors such as construction, 400 room Quest Hotel within Filinvest’s Mimosa Leisure telecommunications, banking and finance, warehousing Park and the 200 room Xenia hotel. The 260 room and logistics, and manufacturing. We expect companies engaged in these businesses to open shop in Clark, Marriott Hotel, the first five-star facility in Clark, will open Angeles, and San Fernando and provide support to in 2Q 2018 while a group of local businessmen is booming businesses in the area. The firms should also developing a 200 room resort hotel that will complement support the operations of back up government offices the Theme Park, envisioned to be the within the National Government Center that recently biggest theme park in Central Luzon. The facility is set to opened in Clark. Thus, we recommend that developers open in 2019. carve out space for these firms that occupy relatively small space compared to outsourcing companies. Colliers encourages developers to complement their hotels with MICE facilities as the area is becoming a Transit-oriented, tourist-centric retail projects popular choice for major international events. In 2017, Colliers believes that developers should build retail Clark hosted a number of meetings during the outlets near the infrastructure projects to capture a larger Association of Southeast Asian Nations (ASEAN) share of the commuting public. For the Manila to Clark Summit. railway project, Colliers considers Malolos and in Bulacan; , Angeles, San Fernando, and Clark in Included in Angeles City government’s tourism Pampanga; and Capas in Tarlac as the most viable development plans is the construction of a convention locations for transit-oriented retail outlets. centre through a public-private partnership. This is one MICE opportunity that local and private developers Colliers is also optimistic that the surge in foreign tourists should consider tapping. will continue to fuel retail demand in the new metropolis. Hence, Colliers encourages mall developers and Redevelopment of brownfield assets and/or old retailers to cater to the retail demands of Korean and buildings Chinese tourists who comprise the bulk of Metro Clark’s Developers must aggressively scout for idle private foreign arrivals. Data from the Tourism Department properties or government assets that they can acquire revealed that average daily spending by Chinese tourists and redevelop into master-planned communities. This more than tripled to USD224 in 2017 from USD63 in strategy is similar to Rockwell Land’s redevelopment of a 2016. Meanwhile, Koreans' average daily expenditure mothballed power facility into a thriving Rockwell Center (ADE) rose 28% to USD247 in 2017 from USD193 in 2016.

10 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International

Explore operation and maintenance (O&M) Some high-end projects do not sustain their premium opportunities because of bad management and poor upkeep.

We encourage the developers' infrastructure units to explore operation and maintenance (O&M) opportunities involving transportation projects in Metro Clark and nearby provinces in the Northern-Central Luzon corridor. Colliers believes that the government’s economic decentralisation push hinges on improved connectivity. Aside from Clark, Angeles, and San Fernando, other key cities in the North-Central Luzon area that will benefit from aggressive construction of transport infrastructure are Capas and in Tarlac; in ; in Bulacan; and .

Opportunities in the Fringes Colliers believes that businesses in the Clark-Angeles- San Fernando area are thriving, driving property firms to develop more office, retail, and residential projects. But Colliers believes that developers should start looking for other cities and municipalities that are viable property investment destinations. Aside from Porac, local and national players should explore opportunities in Mexico and Mabalacat in Pampanga and Capas in Tarlac.

Acquire Land in Large Masterplanned Communities of National Players Pampanga-based developers should look at acquiring parcels of land within integrated communities that are being developed by national players. By building office buildings within the master-planned communities developed by national players, local firms are able to maximise the transportation network and other infrastructure built by national developers. We encourage local players to explore opportunities for partnership with national players that are developing large masterplanned communities such as Ayala, Megaworld, and Filinvest.

Firm up Partnerships with Global Property Management Firms Local developers in Metro Clark, particularly those with limited property management experience, should consider tapping international real estate management services companies to take advantage of the global standard of service that these firms are known for. These property management firms can handle the daily operations of residential and office buildings including management, supervision, improvement and upkeep of facilities. These firms also supervise the technical operations and maintenance of the projects’ various building equipment and manage the financial aspects of the building operations. We believe that a property’s value is retained only if a building is properly maintained.

11 Mequeni: Inviting National Developers to Pampanga | 22 May 2018 | Colliers International

Primary Author: 413 offices in Joey Roi Bondoc Research Manager | Philippines +632 858 9057 69 countries on [email protected] 6 continents : 145 Colliers International | Philippines 11/F Frabelle Business Center Canada: 28 111 Rada St., Legaspi Village Latin America: 23 Makati City 1229 | Philippines Asia Pacific: 86 +632 888 9988 EMEA: 131

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Copyright © 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.