Market Insights 5.5.17

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Market Insights 5.5.17 REAL ESTATE MARKET INSIGHTS May 2017 THE PHILIPPINES The Philippines LITERACY RATE 97.5% 6.8% GROWTH 103 LABOR FORCE GDP 68.1 Mn million 2.6% 24 years old INFLATION RATE POPULATION Average age of Filipinos D E B T CREDIT PHILIPPINE RATING GDP EXTERNAL $292.45B S & P BBB $76.62B (SEPT 2016) MOODY’S Baa2 FOREIGN PUBLIC RESERVES FITCH BBB- 47.4% of GDP $81B (1H2016) 3 Source: Trading Economics, BSP Foreign Investment in the Philippines LEASE TERM 25 years Renewable for another 25 years 40% In some cases, FOREIGN EQUITY LIMIT 50 years Renewable for another 25 years PERSONAL INCOME TAX If annual net taxable 30% income is at least P500,000 annual income (USD10,000) CORPORATE 32% INCOME TAX 4 Source: Trading Economics, BSP Philippine Foreign Direct Investments (FDI) In USD Billions 5 Source: World Bank Government’s Socioeconomic Agenda PRES. DUTERTE’S 10-POINT SOCIOECONOMIC AGENDA Current Tax Reform Ease of Doing Infrastructure Rural and macroeconomic Business Spending value chain policies development Security and Human Capital Science, technology, Social protection Responsible land tenure Development and programs Parenthood & creative arts Reproductive Health 6 Source: DOH Demand Drivers Urban BPO Employee’s Overseas Filipino Population Growth Housing Need Remittances Need to live 10 million Growing number near OF’s can invest in Real Estate of BPO workers their workplace. More than 50% Housing backlog needs of remittances are to be addressed and real estate related It is projected to rise to 56.3% demand for dormitories by 2030 and 66% by 2050. will rise. Source: Keynote speech of Sec. Arsenio M. Balisacan Director General of NEDA 7 “The Philippine Economic Growth and the Growth in the Property Sector” 2015 * 2010 OFFICE MARKET Metro Manila Outlook Key Insights There is a very strong pipeline of office space coming in 2017. Quezon City Demand drivers are also very strong primarily fueled by IT-BPM industry and recently, the online gaming industry. Manila San Juan Ortigas/ Mandaluyong Pasig Market has seen an unprecedented level of pre-commitments at 500,000 sqm Makati Bay/ Pasay BGC / Taguig In 2017, we will see an equilibrium of supply and demand. Parañaque Bonifacio Global City remains to be the biggest Las Pinas producer of office space and is still the preferred location over other districts. Alabang 9 Provincial Outlook Key Insights LAOAG CAGAYAN BAGUIO Companies will continue to look for new TARLAC and untapped labor markets. BULACAN PAMPANGA QUEZON National Government promotes new CAVITE / developments in the provinces. BATANGAS / LAGUNA CAPIZ Preferred areas for expansion are PALAWAN ILOILO Luzon and Visayas. BACOLOD DUMAGUETE BPOs in the provinces will continue to offer relocation incentives to interested applicants. ZAMBOANGA DAVAO 10 Provincial Outlook IT-BPAP Roadmap 2022 Whilst 70% of the total projected IT-BPM workforce will still remain in Metro Manila, National Government’s all inclusive-plan will positively impact expansion in the provinces. IT-BPM labor workforce in the provinces is estimated to grow by 60% in 2022. Provincial full time employees will grow from 1.2 million to 1.8 million in the next 5 years, which translates to 3 million of office requirement 11 Source: IT-BPAP Roadmap 2022 Metro Manila Cityscapes • Most of these districts will be fully developed by 2018. • There will be little land left for development. • The most important districts moving forward will be Bonifacio Global City, Bay Area, Filinvest City, Evia and Arca South. Quezon City 3 MAJOR CBDs MAKATI MAKATI CBD. CENTURY CITY. ROCKWELL CENTER. CIRCUIT MAKATI. Manila San Juan ORTIGAS ORTIGAS CBD. ROCKWELL BUSINESS CENTER. ARCOVIA CITY. Manda- Ortigas/ SILVER CITY. CAPITOL COMMONS. luyong Pasig BGC BONIFACIO GLOBAL CITY. MCKINLEY WEST. MCKINLEY HILL. Makati UPTOWN. VERITOWN. Bay/ Pasay BGC / Taguig 46 BUSINESS PARKS Parañaque QUEZON CITY. UP TECHNOHUB. EASTWOOD CITY. ETON CENTRIS. ARANETA, CYBERARK. ROBINSONS BRIDGETOWNE IT PARK. VERTIS NORTH. UP TOWN CENTER. FAIRVIEW TERRACES. ALI CLOVERLIEF BALINTAWAK. NUVO. MANDALUYONG. GREENFIELD DISTRICT. ROBINSONS CYBERGATE. ROCKWELL SHERIDAN. SAN JUAN. Las Pinas SANTOLAN TOWN PLAZA. MUNTINLUPA. FILINVEST CORPORATE CITY. LA FUERZA. NORTHGATE CYBERZONE. MADRIGAL BUSINESS PARK. ALABANG WEST. TAGUIG. ARCA SOUTH. LAS PINAS. PORTOFINO. EVIA. PASAY. NEWPORT CITY. SM MALL OF ASIA COMPLEX. METROPOLITAN BUSINESS PARK. DOUBLE DRAGON CYBERCAMPUS. FILINVEST Alabang CYBERZONE PASAY. PARANAQUE. ASIAWORLD CITY. ASEANA BUSINESS PARK. AYALA ASEANA. MANILA. CITYPLACE. SAN LAZARO. 12 Regional Cityscapes LAOAG. CAMELLA. VALDEZ CENTER. CAGAYAN. CAGAYAN Unprecedented countryside SPECIAL ECONOMIC ZONE AND FREEPORT. PROJECT PRIMO. development. BAGUIO. BAGUIO AYALA LAND TECHNOHUB. SM BAGUIO CYBERZONE BUILDING. PCH IT CENTER. ABANAO SQUARE. LAOAG CAGAYAN TARLAC. LUISITA BUSINESS PARK. TARLAC PROVINCIAL IT 2 Approximately PARK. BULACAN. PDC TECHNOPARK. ALTARAZA. FIRST 132,028 hectares BAGUIO 2 BULACAN IT PARK. CIUDAD DE VICTORIA. ABS-CBN of master-planned or CAMPUS. URDANETA. CB MALL. 4 TARLAC mixed-use developments 2 9 BULACAN PAMPANGA CAVITE. BATANGAS. LAGUNA. VERMOSA. Over 83 I.T. parks and 5 PONTEFINO. SUNTECH IT PARK. HAMILO COAST. PANGASINAN 1 1 QUEZON SMDM IT CENTER. SOUTHFORBES IT PARK. business districts CAVITE / BATANGAS 11 SOUTHWOODS. NUVALI. ETON CITY. / LAGUNA GREENFIELD CITY. PUERTO AZUL. Countryside development going through CEBU. CEBU IT PARK. CEBU SRP. unprecedented construction boom driven by CEBU BUSINESS PARK. MACTAN NEWTOWN. AKLAN 1 1 CAPIZ ABOITIZLAND CEBU. WATERFRONT TOWNSHIP. CITTA DE MARE. SMC. OAKRIDGE BUSINESS PARK BPO and tourism. PALAWAN ILOILO 5 DAVAO. MATINA IT PARK. ABREEZA. DAVAO PARK 2 9 CEBU DISTRICT. LANANG IT PARK. DAMOSA IT PARK. BACOLOD 7 PAMPANGA. CLARK SPECIAL ECONOMIC ZONE. NORTHPOINT. CAMELLA. CIUDADES. LUBI ISLAND PHILEXCEL BUSINESS PARK. BERTAPHIL BUSINESS PLANTATION. PARK. SM CITY CLARK. CLARK GREEN CITY. GGLC. DUMAGUETE 4 NEPO CENTER. ALVIERRA. CAPILION. AKLAN. PALAWAN. LIO RESORT TOWN. SAN BORACAY NEW COAST. CAPIZ. PUEBLO DE PANAY 4 VICENTE. QUEZON. BALESIN ISLAND TECHNOPARK. ILOILO. ILOILO TECHNOHUB. ATRIA CAGAYAN DE ORO CLUB PARK DISTRICT. GAISANO CAPITAL. AYALA SICOGON. ZAMBOANGA 4 ZAMBOANGA. MEGALAND MALL. ILOILO BUSINESS PARK. BACOLOD. LOPUE’S 9 CITYMALL ZAMBOANGA. EAST IT CENTER. ONE AND TWO SANPARQ. THE DAVAO ZAMBOECOZONE AND FREEPORT NEW BLOCK IT PARK. ROBINSONS CYBERGATE CENTER. TOWNSHIP. ZAMBOECOZONE HIGHLANDS. CAGAYAN DE ORO. LOPUE’S SOUTHSQUARE IT PARK. BACOLOD IT LIMKETKAI CENTER. SM CITY BPO 2. PARK. CAPITOL CENTRAL. DUMAGUETE. CENTRIO. ONE PROVIDENCE. DUMAGUETE BUSINESS PARK. LINKSYS IT PARK. LP Legend: Number of townships IT PARK. YY STAR DAS. 13 Growth Sectors Persistent growth despite prevailing political, Prepare for a boom in infrastructure, security TOURISM AND problems and natural disasters INFRASTRUCTURE for the past 15 years. Source: UNWTO, iBPAP, World Bank 14 PH Growth Amidst Historical Events 15 Philippines Office Supply Current vs. Pipeline 16 METRO MANILA OFFICE MARKET Metro Manila Office Supply Current vs. Pipeline Current vacancy rate across Metro Manila is very tight at 4.3%. The take-up of the BPO industry alone is projected to reach 750,000 to 800,000 sqm this year. The Online Gaming industry could potentially reach BPO industry’s demand numbers within its first year of entry in the market. Bonifacio Global City will produce most of the office supply pipeline, by 2020 Bonifacio Global City will be the same size as Makati office stock. The highest concentration of wealth will be in Bonifacio Global City. In the next 6 years, Bay Area will double its office supply. Quezon City and Ortigas Area will grow by 56% and 44% respectively. 18 Legend: Leased Pre-committed Vacant Metro Manila Office Supply Pipeline Per District, Per Year (2017 to 2023E) 19 *Gross Leasable Area in thousands (sqm) FY 2016 Supply and Demand *Gross Leasable Area in thousands (sqm) 20 Metro Manila - Demand Activity 2016 | By Industry 70% of demand are coming from the information technology – business process management (IT-BPM) industry and 60% prefer Bonifacio Global City (BGC) over any other district. 21 FY 2017 Supply and Demand *Gross Leasable Area in thousands (sqm) 22 Metro Manila - Demand Activity 2017 | By Industry A total of 89K sqm take- up from online gaming within the last 6 months. Bay Area 42% Alabang 32% BGC/Taguig 26% *Online gaming transactions are concentrated in the Bay Area 23 Metro Manila - PEZA Status Full Year 2017E and 2018E Office Buildings 24 PEZA Status By District | FY 2017E to 2023E Total PEZA-Accredited space: 1,257,241 sqm (35 buildings) 4.06M sqm Total space under application for PEZA: 2,341,618 sqm (86 buildings) Total supply Total non-PEZA space: 464,229 sqm (15 buildings) FY 2017-2023E 25 *Gross Leasable Area in thousands (sqm) Metro Manila Current Supply Developer Market Share (1960’s to 2016) 26 Metro Manila Supply Pipeline Developer Market Share (1960’s to 2016) 27 Metro Manila Rental Range PhP / sqm / month 28 Land Values by Business District Y-o-Y Accommodation Accommodation Y-o-Y Increase Land Values Land Values Business *FAR Value Value Increase % Php/sqm Php/sqm District Range GFA/sqm GFA/sqm % (2014- (2015) (2016) (2015) (2016) (2015-2016) 2015) Filinvest City 6 – 14 17% 99k – 264k 19,000 120k-280k 20,000 6% Arca South 6 – 8 0% 210k – 220k 28,000 210k-280k 35,000 27% Bay City 6 38% 150k – 180k 30,000 198k 33,000 10% Bonifacio 6 – 15 14% 270k – 600k 360k-900k Global City 40,000 60,000 50% Makati 6 – 16 27% 210k – 560k 35,000 300k – 800k 50,000 43% Ortigas N/A 10% 109k – 223k N/A 200k – 350k N/A 57% Bonifacio Global City still has the highest land values in the Philippines in the last 10 years. 29 PROVINCIAL OFFICE MARKET Provincial Office Supply (2017-2021E) Luzon, Visayas, and Mindanao (excluding Metro Manila & Cebu) The ever-growing IT-BPM industry significantly impacts acceleration of developments not just in Metro Manila, but all over the Philippines. The efforts of the National Government to fund infrastructure projects positively impact cities nearby Metro Manila such as Cavite, Laguna, and Pampanga as these cities become more accessible.
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