RESIDENTIAL 1Q 2017 11 May 2017

RESIDENTIAL 1Q 2017 11 May 2017

Colliers Quarterly PHILIPPINES | RESIDENTIAL 1Q 2017 11 May 2017 Forecast at a glance Short-term leases Demand Colliers sees luxury condominium take- up being sustained by demand from to temper rising expatriates and affluent families. Millennials working in CBDs will drive the demand for rental housing in the fringes. RFO vacancy Supply Joey Roi Bondoc Research Manager About 22,000 additional units will be Completion of residential condominium projects for completed this year, about five times the first three months of the year picked up after a higher than the number of units delivered in 2016. The bulk of the new sluggish 1Q 2016. Colliers sees about 22,000 supply will come from the Manila Bay additional units being completed this year in the Area, driven by affordable to mid-income major business districts, with the Manila Bay Area projects. accounting for two-thirds of the new supply. While rents in major CBDs are declining, prices continue to Vacancy rate grow albeit at a slower pace. The demand for luxury Vacancies in Makati CBD and Fort units is stable and this encourages affordable and Bonifacio should rise marginally to 14% mid-income developers to pursue high-end projects and 15% over the next 12 months. especially in the Manila Bay Area, where the demand Ortigas Center vacancy should be for luxury projects has spilled over. Colliers relatively stable at 6% to 7%. encourages developers with significant ready-for- Rent occupancy (RFO) units to lease out the units either We expect rents to drop by about 1% to individually or as shared units as long as the leasing 3% over the next 12 months. schemes conform with the developers' market positioning and do not lead to a deterioration of the units' perceived value. To entice more consumers to acquire RFOs, Colliers recommends that developers Metro Manila Residential Stock* offer these units through rent-to-own schemes and be more aggressive in providing flexible and 30,000 25% extended payment terms. Colliers also sees the Contributors: 25,000 For more information: demand for worker accommodation projects being 20% sustained over the medium term. Hence, developers 20,000 Market Contact Name Market Contact Name Market Contact Name Market Contact Name 15% should look at either building or acquiring existing 15,000 projects catering to this market. 10% Title | Market Title | Market Title | Market Title | Market 10,000 5% +1 00 000 0000 +1 00 000 0000 condominium units condominium 5,000 - 0% [email protected] [email protected] Market Contact Name Market Contact Name 2012 2001 2002 2003 2004 2005 2006 2007 2008 2010 2011 2013 2014 2015 2016 2017F Title | Market Title | Market Residential Stock (LHS) YoY Change (RHS) Copyright © 2015 Colliers International. *Includes Alabang, Araneta Center, Eastwood City, Fort Bonifacio, Makati CBD, Manila Bay Area, Ortigas Center, and Rockwell Center The information contained herein has been Source: Colliers International Philippines Research obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed Residential Supply Forecast (units) LOCATION AS OF 2016 2017F 2018F 2019F 2020F TOTAL Alabang 3,700 900 820 - - 5,500 Araneta Center 4,200 300 - - - 4,500 Eastwood City 7,500 980 - 630 - 9,100 Fort Bonifacio 24,200 8,500 3,800 3,000 - 39,700 Makati CBD 21,600 4,700 1,000 590 330 28,400 Manila Bay Area 8,800 5,500 8,500 2,600 2,100 27,600 Ortigas Center 16,200 1,400 780 570 610 19,700 Rockwell Center 4,100 - 340 760 - 5,200 Total 90,700 22,500 15,400 8,100 3,100 140,000 Source: Colliers International Philippines Research in Makati CBD rising to about 14% to 15% over the next Completions in CBDs pick up 12 months given the projected completion of an The completion of residential condominium projects for additional 4,500 units, about a fifth of the projected new the first three months of the year picked up after a supply this year. Colliers also attributes the projected sluggish 1Q 2016. Five residential projects were increase in Makati CBD vacancy to the completion of completed from January to March. These include Breeze mid-income projects in the fringes areas such as The Residences (2,100 units) in the Manila Bay Area; CDC Beacon-Amorsolo Tower in Chino Roces corner Arnaiz Millennium Residential Apartments (130 units) and The Avenue, Makati. Notable projects due to be completed Pearl Place-Tower B (410 units) in Ortigas Center; The within Makati CBD include Kroma Tower by Ayala Land, Venice Luxury Residences-Emanuele (250 units) in Fort Three Central by Megaworld, and Shang Salcedo Place Bonifacio; and Valero Grand Suites (220 units) in Makati by Kuok Properties. CBD. About 3,100 residential condominium units were completed in 1Q 2017, more than triple the number of Fort Bonifacio’s vacancy reached 12.4% from 11.7% in units delivered in the same period last year. SMDC’s 4Q 2016. The business district will account for nearly Breeze Residences in the Manila Bay Area accounted 40% of the projected additional supply this year. Thus, for two-thirds of the total units delivered in the first three we see vacancy rising to about 15% in the next 12 months of the year. months, the fastest among the major CBDs. Projects due to be completed this year include One Uptown Close to an additional 20,000 units are expected to be Residences by Megaworld; and Avida Towers BGC 34th delivered in Metro Manila for the rest of the year. The Street and The Sequioa at Two Serendra by Ayala Land. bulk of the supply will come from the Manila Bay Area, driven by SMDC’s affordable to mid-income projects. Makati CBD Residential Vacancy From about 8,800 units as of end-2016, Colliers sees the 18% Manila Bay Area’s stock surging by more than 200% to 16% more than 27,000 units in 2020. Aside from overseas 14% Filipino workers (OFWs), demand in the emerging 12% business hub is fueled by casinos, BPOs, and offshore 10% gaming firms. Meanwhile, Fort Bonifacio’s supply is 8% expected to reach nearly 40,000 units from about 24,000 6% as of end-2016. 4% 2% Overall, Colliers sees about 12,300 units being 0% completed in Metro Manila annually from 2017 to 2020. 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 1Q16 2Q16 3Q16 4Q16 1Q17 1Q18F 2Q17F 3Q17F 4Q17F Makati CBD Residential Vacancy Vacancy rates continue to rise across major CBDs Source: Colliers International Philippines Research Vacancy in Makati CBD rose to 13.7% in 1Q 2017 from 13.3% in the previous quarter. Colliers projects vacancy 2 Colliers Quarterly | 11 May 2017 | PHILIPPINES | RESIDENTIAL | Colliers International Metro Manila Comparative Luxury 3BR Residential Rental Rates (PHP / sq m / month) LOCATION 4Q 2016 1Q 2017 %CHANGE (QoQ) 1Q 2018F %CHANGE (YoY) Fort Bonifacio 640 - 1,020 630 - 1,000 -1.86% 610 - 980 -1.96% Makati CBD 560 - 1,100 560 - 1,080 -1.64% 550 - 1,070 -1.29% Rockwell Center 780 - 1,070 760 - 1,050 -2.15% 760 - 1,030 -1.24% Source: Colliers International Philippines Research Due to the lack of developable land, Ortigas Center will Rental rates in Fort Bonifacio slid by 1.9% to PHP817 account for only 7% of the additional supply this year. (USD16.2) per sq m a month from PHP835 (USD16.7) Hence, vacancy will be relatively stable at around 6% to per sq m. Colliers sees rents in Fort Bonifacio declining 7%. The business hub’s vacancy in 1Q 2017 was 6.6%, by about 2%-2.5% over the next 12 months. practically unchanged from the previous quarter. Among the projects due to be completed for the remainder of the Rockwell rents declined by 2.2% to PHP910 per sq m a year are Zitan by Greenfield Development, The Currency month. We project rental rates to drop by a slower 1% to by Crown Asia, and The Sapphire Residences-East Bloc 1.2%. by Robinsons Land. Slower increase in capital values Makati CBD Comparative Residential Vacancy Rates Premium 3BR-Unit Residential Capital Values GRADE 4Q 2016 1Q 2017 1Q 2018F 250K Luxury 13.98% 15.47% 16.76% 200K Others 13.18% 13.39% 13.90% All Grades 13.29% 13.65% 14.25% 150K Source: Colliers International Philippines Research 100K PHP / m PHPsq Rents continue to drop 50K Rental rates for premium three-bedroom units in Makati K 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2Q16 3Q16 4Q16 1Q17 CBD declined by 1.7% to PHP823 (USD16.5) per sq m a 1Q16 2Q17F 3Q17F 4Q17F 1Q18F month from PHP837 (USD16.7) per sq m in 4Q 2016. Fort Bonifacio Makati CBD Rockwell Center The drop was slightly faster than the 1.4% decline recorded in 4Q. We expect the rental decline to ease to between1.3% and 1.5% over the next 12 months. Source: Colliers International Philippines Research Prices continue to grow across major CBDs, albeit at a Premium 3BR-Unit Residential Rents slower pace. Capital values for Makati CBD residential 1,200 properties rose by 3.2% to PHP186,000 (USD3,700) per sq m in 1Q 2017 from PHP180,300 (USD3,600) per sq 1,000 m in the previous quarter. Fort Bonifacio prices 800 increased by 2.7% to PHP173,000 (USD3,500) per sq m. The increase is slower than the 5.5% growth posted 600 in 4Q 2016.

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