Philippine Real Estate Outlook And Opportunities For

Philippine Real
Real Estate
Estate :
Outlook and Opportunities for
Investment Market
CREBA – AREAA Trade Mission
Lindsay Orr,
Chief Operating Officer
March 2013
Outline of the Presentation
• Asia Pacific Market Overview
• Philippine Property Market Overview
• Growth Areas and Opportunities
• Challenges
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
2
Asia Pacific Market Overview
3
Global Economic Challenges
Continue to linger…
EU
China
• Very weak growth
• Slowing economic growth
US
• Sovereign debt crisis
• Imbalanced growth
• Slow economic recovery
• Government defaults
• Territorial disputes
Middle East
Japan
• Slowing growth
• Natural disaster risks
• Political and social unrest
• High government debt
• Government upheaval
• Territorial disputes
• Fiscal woes
• Massive government debt
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
4
Asia Pacific commercial real estate markets buffeted by
global headwinds:
• Asia Pacific property market weathered global challenges in 2012
• Overall commercial leasing activity slightly subdued
• Investment volumes remained stable throughout the year
• Rental rates improve in most cities while rents decline in a select few
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
5
Direct Investment into Asia Pacific Real Estate 4Q 2012
• Transactional activity in Asia Pacific is stable, down only 3% from last year
• Asia Pacific saw net outflows of capital from inter-regional investors
$13.8 billion
$2.0 billion
$0.5 billion
$0.4 billion
$2.3 billion
Global Sources of funds
Inter-regional investment volume in Asia Pacific
totalled USD95bn for 2012
Source: Global Capital Flows 4Q12
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
6
Asia Pacific Rental Rates
Manila vis-a-vis Key Asia Pacific markets
250
2012 rental growth*
Manila
220
Bangkok Jakarta Beijing
Net Effective Rents (1Q07=100)
Kuala Lumpur Mumbai
190
Hong Kong Singapore
160
130
100
70
40
1Q07
Manila
3Q07
1Q08
Singapore
3Q08
Hong Kong
1Q09
3Q09
Beijing
1Q10
Mumbai
3Q10
1Q11
Bangkok
3Q11
1Q12
Jakarta
3Q12
Kuala Lumpur
Note: Figures relate to the major submarket (CBD) in each city. For Singapore, figures refer to Raffles Place only. *2012 rental growth refers to the annual change from 4Q11 to 4Q12.
Sources: Jones Lang LaSalle (Real Estate Intelligence Service), 4Q 2012; The Office Rental Index, February 2013
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
7
Asia Pacific Rentals
4Q12 Average Grade A Rent (PHP/sqm/month)
5,071
Office rents in Manila continued to
grow in 2012, at around 3.3% y-o-y.
3,571
Despite the rental growth, Manila
remains one of the cheapest in the
region.
3,421
2,648
2,536
2,143
1,497
Hong
Kong
Beijing
Tokyo
Exchange rate used (average Dec 2012): PHP 41.007: USD 1
Shanghai Singapore Mumbai
Ho Chih
Minh
895
790
Jakarta
Manila
653
629
Bangkok
Kuala
Lumpur
Note: (1) Manila refers to the Makati CBD and Bonifacio Global City Grade A office market.
(2) Figures relate to the major submarket (CBD) in each city. For Singapore, figures refer to Raffles Place only.
Sources: Jones Lang LaSalle (Real Estate Intelligence Service), 4Q 2012; The Office Rental Index, February 2013
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
8
Supply Variations Across Region
Projected % Additions to Office Stock in 2013
7.4%
Seoul
6.9%
Beijing
8.7%
0%
10.6%
5.2%
10.2%
Delhi
Bangkok
0.9%
Mumbai
Hong Kong
33.5%
Ho Chi Minh
9.3%
Jakarta
Tokyo
Shanghai
5%
18.7%
Manila
Kuala Lumpur
0%
Singapore
0%
Sydney
Note: (1) Manila refers to the Makati CBD and Bonifacio Global City Grade A office market.
(2) Figures relate to the major submarket (CBD) in each city. For Singapore, figures refer to Raffles Place only.
Sources: Jones Lang LaSalle (Real Estate Intelligence Service), 4Q 2012
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
9
Philippine Property Market Overview
10
Property Market Direction
Emerging Business Districts
25* emerging districts with approximately
More than 1,300 hectares of developed land
24
Makati CBD
1
5
25
8
10 9
23
2
4
7
6
16
3
22 Arca South (FTI)
2 Eton Cyberpod Centris
23 Vertis North
3 Eastwood City
24 Fairview Terraces
4 Araneta Cyberpark
25 Circuit Makati
5 Greenhills Redevelopment
6 Rockwell BPO Complex
7 EDSA Central
Bonifacio Global City
12 13
15
Ortigas CBD
1 UP Techno Hub
8 Robinsons Cyberpark
9 Rockwell Center
10 Century City
11
11 McKinley Hill
14
12 SM Mall of Asia Complex
22
13 Metropolitan Business Park
14 Newport City
15 Aseana IT Business Park
17
16 Asiaworld City
18
17 Madrigal Business Park
19
20 21
18 Filinvest Corporate City
19 Greenfield City
20 Eton City
21 Nuvali Canlubang
Note: *Includes those that are geographically-located outside Metro Manila.
Source: JLL Research & Consulting
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
11
Office Property Market
in Millions
Office Supply (In million sqm)
Metro Manila Current vs Pipeline Supply
Total of 8M sqm. supply
across districts (current – 2016F)
3.50
0.14
3.00
2.50
Current Supply = 6.4M
2.00
Future Supply = 1.6M
0.20
1.50
0.70
1.00
0.18
0.50
0.00
3.04
Makati
1.43
Ortigas Center
0.52
0.32
Bonifacio
Alabang
0.20
0.15
0.08
0.20
Quezon City McKinley Hill
Global City
0.08
0.31
0.20
Eastwood
Bay City
0.01
0.02
0.16
0.07
Mandaluyong
City
Asia Pacific
Market
Philippine
Property
Araneta
Center
Growth Areas &
Opportunities
Challenges
12
Office Property Market
Metro Manila Supply Take-up and Pre-commitments
Total space committed as of end of 2012:
482,000 sqm
Office space leased as of end of 2012
Pre-commitments signed as of end of 2012
365,000 sqm
117,000 sqm
Ortigas
4%
Newport City
1%
McKinley Hill
1%
Manila
1%
Mandaluyong
9%
San Juan
2% Alabang
3%
Alabang
12%
Quezon City
15%
Araneta
Cyberpark
10%
Bay City
14%
Makati
19%
Eastwood
5%
Bonifacio
Global City
31%
Ortigas
26%
Bonifacio
Global City
31%
Makati
16%
Note: Estimated demand for 2005-2010 was 300,000 sqm per year; and 2011 was 360,000 sqm
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
13
Residential Property Market
Metro Manila Condominium Supply from 1999 to 2018E
Existing (1999-2012)*
Future (2013-2018E)*
High-End
5,100 units
High-End
3,930 units
3%
3%
135,650
units
149,000
units
Mid-End
131,720 units
97%
Mid-End
143,900 units
97%
Selling Price
Typical Price per sqm
Unit Size
High-End
Php 15 M and above
Php120,000 and above
Above 160 sqm
Mid-End
Php1.5 M to Php15 M
Php50,000 to Php110,000
Below 150 sqm
Note: (1) Figures are as of Jan 2013. (2) Existing residential units are units completed from 1999 to 2012 while future residential units are new units that will be completed from
2013 to 2018. (3) Metro Manila refers to the following districts/cities: Makati CBD and its fringe areas (includes Rockwell Center, Century City, Chino Roces area), Bonifacio
Global City and Taguig, McKinley Hill, Ortigas CBD and the nearby areas in Pasig City and Mandaluyong City, Quezon City, Bay City, Newport City, Manila and Pasay City,
Philippine
Asia Pacific
Growth Areas &
Alabang, and the cities of Parañaque and Muntinlupa (outside Alabang).
Challenges
Source: HLURB, Various brokers and developers, JLL Research & Consulting
Property
Market
Opportunities
14
Residential Property Market
Supply Share Per District – 1999 to 2018E
Parañaque /
Muntinlupa
7%
Newport City
3%
Manila/
Pasay
13%
Bay City
3%
Alabang
2%
Parañaque /
Muntinlupa
6%
Makati CBD &
Fringe
18%
Newport City
2%
Manila/
Pasay
12%
Bay City
5%
135,650
units
Quezon City
19%
Bonifacio Global
City / Taguig
14%
149,000
units
Alabang
1%
Quezon City
23%
Ortigas/ Pasig/
Mandaluyong
20%
Bonifacio Global
City / Taguig
11%
Ortigas/ Pasig/
Mandaluyong
18%
McKinley Hill
1%
McKinley Hill
1%
Notes:
Makati CBD &
Fringe
20%
Future (2013E-2018E)
Existing (1999-2012)
(1) Includes only mid-end and high-end residential condominium supply
(2) Figures are rounded off to the nearest tens
Sources: HLURB, Various brokers and developers, JLL Research & Consulting
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
15
Residential Property Market
Residential condominiums outside Metro Manila
• Low- to high-rise residential
condominiums in regional urban
centers, such as
•Metro Cebu
•Metro Davao
•Cagayan de Oro City
•Angeles City
•Baguio City
•Tagaytay City
•Iloilo City
•Condominium developers include:
•Major developers
•Local developers
Source: JLL Research & Consulting
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
16
Retail Property Market
Existing and Future Retail Shopping Mall Supply
Existing Retail Supply
Future Retail Supply
(As of 2012)
(2013E-2015E)
Provincial
6.1 million sqm
48%
Provincial
0.9 million sqm
57%
Metro Manila
6.7 million sqm
52%
Metro Manila
0.7 million sqm
43%
Source: JLL Research & Consulting
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
17
Hotel Property Market
Supply of Hotel Developments in Metro Manila (2011-2016)
5,000
4,700
4,500
4,240
4,170
4,000
Total Launched and Planned Hotel
Rooms (2013 – 2016): 14,830 rooms
Total Proposed Hotel Rooms
(with no target date yet): 1,250 rooms*
Number of Hotel Rooms
3,500
3,000
2,500
2,000
1,500
1,720
1,500
1,370
1,000
500
2011
Makati CBD
Bonifacio Global City
2012
Manila Bay Area
2013E
2014E
Newport City
Quezon City
2015E
Alabang
Ortigas CBD
2016E
Bay City / Entertainment City
Note: Total proposed hotel rooms with unconfirmed target completion dates are mostly located within Entertainment City in Parañaque City.
Source: JLL Research & Consulting
Asia Pacific
Market
Philippine
Property
Cebu
Property
Growth Areas &
Opportunities
18
Hotel Property Market
Future Hotels in the Provinces
• New hotel brands entering the provinces
- Park Inn by Radisson
- Richmonde Hotel
- Lotte Hotel
- Courtyard by Marriott
• Boutique/ budget hotel chains expanding
- Seda Hotels
- Go Hotels
- Islands Stay Hotels
- Tune Hotels
Select Future Hotels in the Provinces
Source: JLL Research & Consulting
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
19
Market Trends
Weather Forecast
Metro Manila
Supply
Demand
Rent/Price
Office
Residential
Retail
Hotel
LEGEND
Robust growth Moderate growth Minimal growth Minimal decline
Moderate decline Significant decline
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
20
Growth Areas and Opportunities
21
1) Offshoring and outsourcing
25.0
CAGR:
20%
Philippine O&O industry
In US$ bn
15.0
CAGR:
25%
CAGR:
30%
CAGR:
15%
9.0
7.2
3.2
Direct
Employment
20.0
CAGR:
9%
2006
2009
240K
440K
2010
530K
Additional
Office Demand
Low-end 2016
Baseline 2016
Road Map 2016
680K
900K
1.3M
517K
1.3M
2.6M
Source: Business Processing Association of the Philippines
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
22
2) Overseas Filipinos Remittances
25
OF Remittances (in USD billions)
20
OF Remittances (2012):
USD21.4 billion
15
10
5
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
**OF remittances refer to cash remittances by Overseas Filipinos
Sources: Bangko Sentral ng Pilipinas, JLL Research & Consulting
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
23
3) Transportation/Infrastructure Development
Private-Public Partnership
Select PPP Projects
Roads
Rail
Airports
Ports
Cebu Trans-Axial
Highway*
LRT 1 Cavite
Extension
Mactan-Cebu
International
Airport Passenger
Terminal
Central Roro
Spine
NAIA Expressway
LRT 2 Masinag
Extension
Puerto Princesa
Airport (upgrade)
Davao Sasa Port
(rehabilitation)
NLEX-SLEX
Connector Road
NAIA-Clark Express
Rail Link
New Bohol
(Panglao) Airport
New Cebu Port
CALA Expressway
South Line
Modernization
NAIA Upgrade
Central Luzon
Expressway
MRT Line 3
Maintenance
Clark Airport (main
airport fro Greater
Capital Region)
Daang-Hari SLEX Link
Road
MRT Line 3 Additional
LRVs
Kalibo Airport
upgrade
Note: List of projects include ongoing PPP projects and potential projects under PPP.
* Included by the PPP in the list of projects for possible funding by the Project Development and Monitoring Facility (PDMF)
Source: JLLL Research & Consulting
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
24
4) Tourism
Foreign Tourist Arrivals and Tourist Receipts
4,000,000
3,500,000
6,000
Tourist Arrivals (2011): 3.9 million visitors
Tourist Arrivals (2012): 4.3 million visitors
5,000
4,000
Tourist Arrivals
2,500,000
2,000,000
3,000
1,500,000
2,000
Tourism Receipts (in USD millions)
3,000,000
1,000,000
1,000
500,000
0
0
1999
2000
2001
2002
2003
2004
2005
Tourist Arrivals
2006
2007
2008
2009
2010
2011
Tourism Receipts
Sources: Department of Tourism (DOT), UNWTO
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
25
5) Real Estate Investment Trust (REIT)
Evolution of the Global REIT Market
Japan
South Korea
Singapore
South Africa
France
Greece
Taiwan
Brazil
USA
Netherlands
1990’s
1970’s
1980’s
1960’s
Australia
Thailand
Hong Kong
Bulgaria
Malaysia
Israel
Germany
UK
Italy
2009 - Present
2000’s
Canada
Belgium
Turkey
New Zealand
The Philippines
India
China
Mexico
Source: The Association for Real Estate Securitization and CFA Institute
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
26
Business Optimism
Philippines to become one of the fast-growing economies
• IMF : raised 2013 economic growth forecast for the Philippines to 6.0%
• Tholons : Metro Manila and Cebu are the top 3 and top 8 global outsourcing destinations, respectively
• Moody’s Investors Service : October 2012 – Moody’s upgraded the Philippines’ credit rating to Ba1, just
one notch below investment grade
• S&P : July 2012 – S&P raised the Philippines’ debt rating to BB+, the highest level since 2003
• Deutsche Bank : touted the Philippines as the strongest performing economy in Asia today. Its 6.4%
growth in 1Q12 made it the best performing economy in the region next to China.
• CNBC : considers the Philippines as the top country for long term growth prospects due to the rapid
population growth
• HSBC : Philippines will leapfrog 27 places to become the 16th largest economy in the world by 2050
• Goldman Sachs : the Philippines can be one of the top 10 “growth countries”, or economies that account
for at least 1% of global GDP, within the decade.
• Morgan Stanley : included Philippines in the “overweight group” together with China, Russia, Brazil and
South Africa in their Global Emerging Markets list. Philippines could become a “breakout nation”
• BofA : expects Philippines’ outsourcing industry to generate as much as $25 billion in revenue by 2016,
providing employment opportunities to as many as 1.3 million individuals
Sources: CNBC, HSBC, MSCI, Bank of America (BofA), Goldman Sachs
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
27
2005
2006
2007
Asia Pacific
Market
2008
2009
Philippine
Property
Typhoon Morakot
SuperFerry sank in Zamboanga
Typhoon Ondoy
Typhon Pepeng
Greenbelt 5 Robbing
Maguindanao Masacre
2010 Philippine National Elections
NoyNoy Factor?
Manila Hostage Crisis
DLSU Explosion during Bar Exams
Typhoon Megi
Vizconde massacre suspects acquitted
2011 Makati Bus Explosion
Tropical Storm Juaning
2012 Corona Impeachment Trial
Negros and Cebu Earthquake
Territory Dispute with China
"To Fly Again"
Valentine's Day Bombing
V-Day Bombing Masterminds deathn sentence
State of Emergency Declaration
Milenyo
Southern Leyte Mud Slide
Cotabato Bus Station Bombing
ERAP Conviction
ZTE Scandal
Glorietta 2 Bombing
Congress Bombing
Manila Peninsula Incident
Cotabato City Bombing
ZTE-NBN Irregularities
Meralco Stockholders Meeting
Ces Drilon Kidnapping
MV Princess of the Star sank
H1N1 Outbreak
Death of Corazon C. Aquino
500,000
400,000
300,000
Total Tourist Arrivals
No. of Employees
Est. No. of Employees
2009
2004
2008
2003
2007
2002
2006
2001
Oakwood Mutiny
"In The Presence of my Enemies"
2004 Philippine General Elections
Infanta Mud Slide
SuperFerry bombing
General Santos Christmas Bombing
2005 Davao Bus Terminal
General Santos City Mall Bombing
Hello "Garci" scandal
911
EDSA Dos
EDSA Tres
Gracia and Martin Burnham Kidnapping
2002 Zamboanga Bombing
Captured Jemaah Islamiyah
Sentenced Jemaah Islamiyah
2003 SARS Outbreak
Davao Airport Bombing
Jemaah Islamiyah escape
Jose Pidal Plunder Case
2001 Philippines General Elections
Dos Palmas Kidnapping
Country Risk: BPO Employees vs. Tourist Arrivals
Growth in Office Demand Despite Country “Issues”
800,000
5,000,000
Visitor Arrival
700,000
4,500,000
4,000,000
600,000
3,500,000
3,000,000
2,500,000
2,000,000
200,000
1,500,000
1,000,000
100,000
500,000
2010
2011
Growth Areas &
Opportunities
2012F
-
Challenges
28
Challenges
29
Challenges:
• Can the Country sustain its strong macroeconomic fundamentals.
• Will the reforms undertaken by the Aquino government be sustainable after
2016 when the President steps down.
• Will the strengthening Peso have a negative impact on BPO’s and the
export industry generally.
• Will the level of overseas worker remittances ($ 21 Billion – last year) be
sustainable.
• Need to prevent a bubble from forming in the real estate sector. Supply must
be matched by end user demand. Speculation and price spikes should be
avoided.
Asia Pacific
Market
Philippine
Property
Growth Areas &
Opportunities
Challenges
30
Jones Lang LaSalle
Who We Are, What We Do
• JLL is the leading real estate services firm in the country
- Sales and Leasing
- Project and Construction Management
- Facilities & Property Management
- Research, Consultancy and Valuation
• Forefront of the BPO industry - servicing 10 of the top 12 BPOs in the Philippines,
handled more than 50 contact center clients, and acquired over 130 sites for these clients.
• Serviced around 50% of all office space occupied by the outsourcing industry
• Negotiated about 110,000 sqm of build-to-suit buildings, and about 90% of BPO office
lease transactions outside Metro Manila.
• Handled over 350,000
leases).
sqm of office space in 2012 (renewal, expansions and new
• Transacted approximately 92% of office space in Bonifacio Global City.
• Managed 14 buildings and around 400,000
sqm in facilities management
• Sold over Php25B worth of properties in 2012.
31
Thank you
Lindsay Orr
Chief Operating Officer
+63 2 902 0870
[email protected]
© Jones Lang LaSalle. All rights reserved. 2013
This presentation has been produced solely as a general guide and does not constitute advice. Jones Lang LaSalle (JLL) has used and relied upon information from sources generally regarded
authoritative and reputable, but the information obtained from these sources may not have been independently verified by JLL. Whilst the material contained in the presentation has been
prepared in good faith and with due care, no representation is made for the accuracy of the whole or any part of the presentation. No liability for negligence or otherwise is assumed by JLL for any
loss or damage suffered by any party resulting from their use of this presentation. The whole or any part of this presentation must not be reproduced or copied without the JLL’s written consent.
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