Q2 Property Market View

Property MarketView
June 2009
UNCHARTERED TERRITORY
The US is suffering a recession much
worse than the “Great Depression”
of the 1930‟s and has pulled the
global community into recession as
well.
(continued on page 10)
Economic Overview
The economy remains afloat but is
teetering on the brink of recession
as some experts would put it. The
0.4% GDP growth for the first quarter of 2009, was the lowest in over
ten years. This can be attributed to
the government‟s failure to implement project spending to be partly
financed by the PhP330 billion economic stimulus package.
Equally to blame is the lack of consumer spending during the period.
Results from recent studies showed
a large portion of the respondents
sampled showed some concern on
the outcome of the economy and
the increase in household expenses.
This has led them to be tight on
their finances and more conscious
of their spending.
Prices of common goods and services have remained relatively stable as inflation continuously declined over the period. The PesoUS Dollar exchange rate has likewise remained stable at the
PhP48:US$1 level.
(continued on page 6)
Key Indicators
GDP Growth (1Q2009)
0.4%
GNP Growth (1Q2009)
4.4%
Forex (Jun „09) wtd avg
PhP48.14 -US$1
91-Tbill (15 Jun ‟09)
4.494%
5- year Tbond Rate ( May‟ 09)
6.178%
7-year Tbond Rate ( Feb‟09)
7.000%
Inflation (Jun ‟09)
1.5%
Phisix (30 Jun ‟09)
2,437.99
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CBRE Property MarketView | Page 2
Metro Manila Office Market
The demand for office space continues to slow down as the global crisis
pushes on. This has been aggravated by the existing surplus in office
market coming from the turnover of
newly constructed and recently vacated office units. This has resulted
into pronounced reductions in rental
rates across the different office districts within Metro Manila.
The BPO industry, the main driver of
the office market, continues to grow
however at a pace which is a lot
slower compared to the past few
years. To further compound the
situation, a major BPO company
recently announced that it has devised a scheme wherein it can markedly increase its employee headcount without the need for additional
space. Other BPO companies have
followed the same lead and may be
in the process of devising a system
of their own.
In the same manner, several BPO
companies have given up some of
their more expensive spaces in the
CBD and consolidated in their remaining spaces. This is in line with
most of the companies‟ policy of
cost cutting which is mainly drawn
from the reduction of operational
expenses.
Makati CBD
The CBD is one of the strongest hit
among the different office districts as
a number of companies with expiring lease agreements (most of which
are involved with outsourcing)
choosing not to renew as a cost cutting measure.
These companies
have either consolidated in some of
their existing spaces or transferred to
lower rent cost locations. This is
clearly reflected by the vacancy rate
which has increased to 10.6% from
7.6% during the previous quarter.
Makati CBD (Premium / Grade A)
As a result, landlords have dropped
rental rates by 15% from the previous quarter to settle at PhP852/sqm/
month to stem the exodus of these
companies as well as remain competitive in the market. On top of the
rate cut, landlords are offering additional concessions such as longer
rent free periods, modified escalation schemes and fitted out space at
minimal to no additional costs.
Ortigas Center
There were transactions within the
district during the period. Some of
these involved lease renewals by
companies occupying large spaces
in prime office buildings. Given the
present situation it would be safe to
assume that aforementioned special
concessions may have been given by
the landlord for the tenant to agree
to the lease renewal.
Defying the ongoing crisis, the Zuellig Group broke ground for what is
hoped to be the country‟s first LEED
certified building the, Zuellig Building. The event brought a little shine
to the lackluster performing CBD
office market during the period. The
building, once completed in 2012, is
hoped to achieve a LEED Gold certification.
Fort Bonifacio
Fort Bonifacio continues to perform
well and has remained a major alternative to the CBD. Compared to
the other districts Fort Bonifacio has
been better insulated from the ongoing crisis as shown by its vacancy
rate which registered at 1.9% for the
period.
However, the district was not totally
spared of the effects of the crisis as
rents during the period dropped by
about 2.3% to PhP675/sqm/month.
(continued on page 3)
Average Vacancy : 10.6% UP
Average Rent
: down by 4.59%
PhP852/sqm/mo.
New Supply
No New Supply
Major Office Buildings (Premium)
Ayala Tower One, The Enterprise Center,
Philam Life Tower, & RCBC Plaza.
Average Vacancy : 2.8% UP
Average Rent
: down by 4.59%
PhP581/sqm/mo.
New Supply
No New Supply
Major Office Buildings
Discovery Center, Robinsons EquitablePCI Tower, SMPPI Corporate Center,
Taipan Place, Union Bank Plaza, Wynsum Corporate Plaza
Quezon City
Average Vacancy : 11.4% UP
Average Rent
: down by 5.24%
PhP473/sqm/mo.
New Supply
No New Supply
Major Office Buildings
Citibank Square, CyberOne, Epixtar
House, IBM Plaza, & TechnoPlaza One.,
1800 & 1880 Building, Bldgs. A-F UP
Ayala TechnoHub
Alabang Business District
Average Vacancy : 9.6% FLAT
Average Rent
: down by 4.83%
PhP538/sqm/mo.
New Supply
No New Supply
Major Office Buildings
i-Hub 1 & 2, Insular Life Corporate Center, Northgate Cyber Plaza@ A, B, C &
D, 5132 Building
Fort Bonifacio
Average Vacancy : 1.9% DOWN
Average Rent
: down by 3.63%
PhP675/sqm/mo.
New Supply
No New Supply
Major Office Buildings
Net One, Net Square, Net Cube, HSBC
Center, Bonifacio Technology Center,
BGC Promenade, Bonifacio High Street
Disclaimer: We obtained the information from sources
we deemed reliable. However, we make no guarantee, warranty or representation about it. It is submitted/transmitted as it is subject to the possibility of
errors or omissions. We expressly disclaim all liability
to any person in respect of consequences of anything
done or omitted to be done wholly or partly in reliance
upon the whole or any part of the contents of this
publication or material. The reader is advised not to
act or refrain from acting on the basis of any matter
contained in it without conducting investigation or
seeking professional advice.
CBRE Property Market View | Page 3
Metro Manila Office Outlook
Office rents in Metro Manila are expected to continue moving downward by as much as 10% q-on-q
until the end of the year. Declining
demand due to the crisis and over
500,000 sqm of new office supply
expected for turn over before the
year ends will be the main factors
contributing to this. This will likewise
face additional pressure from the
provincial sites which are commonly
known as the “new wave locations”
where costs are much lower.
With lease agreements up for renewal, the main challenge being
faced by landlords will be keeping
their current tenants from vacating
their rented space with tenants occupying whole floors most difficult to
negotiate. This has led some landlords to be more considerate and
innovative in re-packaging renewed
lease agreements aside from the
significant discounts and modified
escalation.
The upside is that new entrants in
the market will have more options
ted units and the additional concessions that landlords are willing to
give will go well for the office market
in these times of crisis. With most
companies cutting back on expenses, the prevailing market situation may allow some of them to pursue their planned start up or expansion of operations, more so as this is
expected to continue for the remainder of the year. This being said, the
likelihood of a major office transaction, like the recently concluded acquisition by Thomson Reuters, occurring within the year may not be farfetched.
for their office space requirements
be it in the CBD or in the other business districts. The selection can come
from newly constructed office buildings which are being leased out bare
at lower rates or older but fully fitted
office spaces but at a higher rent.
On the same note, the savings
brought about by declining rents, the
availability of reasonably priced fit-
Industry experts believe that the BPO
and O&O industry will start picking
up in the early part of next year
which will most likely be the same
period when rents will stabilize.
Metro Manila will still be the primary
location to be considered for BPO
companies for their central operations and we will see more of this
happening in the districts outside of
the CBD.
Metro Manila Office Market (continued from page 2)
As with the other districts, landlords
had to adjust their rates as a measure to retain their existing tenants as
well as remain competitive in the
market.
Taking advantage of this situation,
Thomson Reuters, a major multinational information company, took up
a substantial amount of space in
one of the buildings up for completion within the next few months in
McKinley Hill. This is in addition to
the space it took up in the same
area some time during the start of
the year.
Ortigas Center
The Ortigas Center has also managed to hold up quite well during
the period. This was reflected in the
rents which dropped by 2.7% from
the previous period to settle at
PhP581/sqm/month. Unlike the
CBD, landlords in Ortigas Center
were not as hard pressed as rents in
the area have remained relatively
stable and fairly reasonable since
the beginning of the year.
Vacancy in the district, which registered at 2.8%, posted a mild increase from the 1.7% of the previous
period. This gives an indication of
the possibility that some tenants
within the district have consolidated
their spaces as a move to cut down
on costs. Increase in vacancy may
be viewed as insignificant as there
have been no new supply turned
over during the period.
Alabang Business District
Vacancy in Alabang remained unchanged at 9.6% as tenants have
either chosen to remain within the
district or are in the middle of active
leases. Tenants, in general, within
the district have specifically chosen
to locate in the area which is why
they are staying on.
Rents in the area, as in the other
districts, dropped as a reaction to
the ongoing crisis. A drop of 4.6%,
one of the lowest among the different districts, was recorded for office
rent which registered at PhP538/
sqm/month during the period.
Quezon City
The most notable drop in rents came
in the Quezon City area wherein
rates dropped by 15.6% to PhP473/
sqm/month on the average. This
comes with the vacancy, as a whole,
in the Quezon City area going up to
11.4% from 10.7% during the previous period. On top of the economic
crisis exerting pressure on rents additional pressure is exerted by the
oversupply issue currently being experienced in the area in particular
Eastwood City.
Eastwood City exhibited a reduction
of 18.9% in rent to PhP464/sqm/
month mostly coming from the pressure exerted by the 1880 building
and the eCommerce Plaza which
both remain largely vacant.
In contrast, rents for office space in
the UP Ayala TechnoHub buildings
have been reduced by 6.6% to settle
at PhP495/sqm/month. However,
the office complex registered full
occupancy during the period.
CBRE Property Market View | Page 4
Metro Manila Business Districts
Metro-Manila, also known as the National Capital Region (NCR), is the economic, political, and cultural heart of the Philippines. The metropolitan area
is composed of the city of Manila and 16 neighbouring cities and municipalities with a population of over 10 million people. Most office developments are concentrated in the two primary Business Districts, the Makati
CBD and Ortigas Center.
The Makati CBD. Developed by the Ayala family, the Makati CBD is the financial and commercial heart of the Philippines and contains the headquarters of many banks, multinational corporations, and big local corporations.
Most Prime/Grade A office buildings are located along Ayala Avenue, also
known as the Wall Street of the Philippines, while Grade B and C buildings
are concentrated in neighbouring Legaspi and Salcedo Villages. The Makati
CBD commands the highest lease rates for offices and residential homes
and condominiums.
Ortigas Center. Developed in part by the Ortigas family 8 kilometers North
of Makati, the Ortigas Center is the second most important commercial and
business district in the country and contains the headquarters of the Asian
Development Bank (ADB) and San Miguel Corporation. The Ortigas CBD is
also a major shopping destination containing a number of major shopping
malls in the country.
Eastwood City. This 15-hectare mixed-use community is being developed by
Megaworld Corp. and was the first approved IT Park in the country. The office market is dominated by approximately 60 call center/BPO and IT locators employing more than15,000 people.
Alabang. Filinvest Corporate City is a 244-hectare mixed use community
developed by the Filinvest Development Corp. (FDC) while the Madrigal
Business Park is a 25-hectare joint development by the Madrigal family &
Ayala Land. As Manila‟s population continues to spread southward, call
center/BPO and IT companies are increasingly choosing to locate to the Alabang area.
Bonifacio Global City. Also known as Fort Bonifacio, this 214-hectare integrated community on the fringes of the Makati CBD is being developed by
the Fort Bonifacio Development Corp. (FBDC) as an extension to the Makati
CBD.
Rockwell Center. This 15.5-hectare upscale self-contained community on the
fringes of the Makati CBD was developed by Rockwell Land Corp. (RLC),
part of the Lopez Group of companies, on the site previously occupied by
the Rockwell Power Plant.
Bay Area: The Bay Area contains the Aseana Business Park and SM Bay City,
which is the site of the country‟s largest shopping mall. The area currently
offers limited existing office space as it largely remains in the early development stages.
Araneta Center (Cubao): Located in Cubao (Quezon City), the Araneta Center is a 35-hectare commercial shopping, entertainment, and transportation
hub developed by the Araneta family.
UP Ayala Land Techno Hub : The 37.5 hectare science and technology park
developed by Ayala Land across the UP campus in Quezon City is envisioned as a university-based catalyst for technological innovation along the
lines of the Stanford-based Silicon Valley corridor.
The following are the most important features of office
tenancy in the Philippine real estate market:
BUILDING CLASSIFICATIONS
Premium, A, B, C & BPO/IT.
SHORT-TERM LEASE
Typically 3 years.
LONG-TERM LEASE
Typically 5 to 10 years.
REQUIRED SECURITY DEPOSIT
3 months office rent refundable at the end of the lease
period.
REQUIRED ADVANCE RENTAL
3 months applicable to the first 3 months of the lease
term.
SUCCEEDING RENTS
Quarterly in advance.
NET RENT
Electricity, water, A/C costs, insurance, association and
building management fees are for the Tenant’s account.
SPACE MEASUREMENT
Leaseable” or “Semi-Gross” area includes areas constructed for individual tenants such as lift lobbies, passage ways, toilet areas, & pantry areas; but excludes the
stairs, elevator shafts, and machine rooms, and all
vertical shafts carrying services.
TYPICAL USEABLE FLOOR AREAS
1,000 to 1,500 sqms (10,764 to 16,146 sf)
PARKING ALLOCATION
1 slot per 100 sqms (1,076 sf) leased.
BUILDING MANAGEMENT DUES
Generally covers the cost of building maintenance,
common areas, staff salaries, and normal hours of airconditioning operations.
CBRE Property Market View | Page 5
Metro Manila Luxury Residential Market
The Luxury Residential Apartment /
Condominium Market remained
unchanged from the previous quarter with rental rates and terms from
the previous quarter carrying on to
the present. with no new supply being added. The market continues to
be driven by the expatriate market.
Tower in Fort Bonifacio. The 300
square meter unit was reportedly
sold for around PhP33 million which
has still been the going rate since
last year.
Makati CBD (Luxury/Grade A)
Supply (Luxury)
Supply (Grade A)
: 182 Units
: 2,383 Units
Asking Rents (Luxury) : Php180k -PhP220k
Asking Rents (Grade A) : Php150k - PhP190k
New Supply (Luxury)
No significant new supply during the quarter
New Supply (Grade A)
No significant new supply during the quarter
Major Luxury/Grade A Buildings*
One Roxas Triangle, Shang Grand Tower,
Residences at Greenbelt Laguna Tower
Pre-sale activities are quite limited
given that there are only two ongoing developments, Discovery Primea
and The Raffles Residences. It would
seem that there has been a slowdown in pre-sales after the “by invitation only” sales event of The Raffles Residences last quarter most
likely due to the ongoing crisis.
Rockwell Center (Luxury/Grade A)
Supply (Luxury)
Supply (Grade A)
: 300 Units
: 559 Units
Asking Rents (Luxury) : Php160k to PhP180k
Asking Rents (Grade A) :
Php75k - PhP85k (1BR)
PhP110k - PhP130k (2BR)
New Supply (Luxury)
No significant new supply during the quarter
Contrary to the expectations given
the current state of the economy,
prices of luxury condominium units
have remained relatively stable. A
recent sale transaction took place
within the period which involved a
sale of a unit in the Pacific Plaza
New Supply (Grade A)
No significant new supply during the quarter
Major Luxury/Grade A Buildings*
Rizal Tower, Hidalgo Place, Amorsolo Square,
Luna Gardens, Joya
Bonifacio Global City (Luxury/Grade A)
Metro Manila Luxury Residential Outlook
Supply (Luxury)
Supply (Grade A)
: 982 Units
: 942 Units
No significant changes are expected
to occur in the market in the coming
months. so long as the expatriate
market continues to hold. Compared to other countries in the region, recent independent reports
have it that the Philippines has one
of the lowest cost in terms of expatriate housing. This is the most likely
reason why the market will remain
as it is.
Asking Rents (Luxury) : PhP180k - Php220k
Asking Rents (Grade A)
: Php75k - PhP80k (1BR)
: Php85k - PhP110k (2BR)
New Supply (Luxury)
No significant new supply during the quarter
CONDOMINIUM LEASE RATES
Size
(sqm)
Lease Range Average
(PhP)
(PhP)
Legaspi Village
1 Bedroom
40 - 80
60k-80k
70k
2 Bedroom 110 - 150
85k-140k
100k
3 Bedroom 150 - 250
100k-180k
125k
New Supply (Grade A)
No significant new supply during the quarter
Major Luxury/Grade A Buildings*
Pacific Plaza Towers, Essensa East Forbes,
Regent Parkway, One Serendra
HOUSE LEASE RATES*
Lease Range
(PhP)
Average
(PhP)
Forbes
Park
200,000 - 750,000
300,000
Dasmariñas
Village
180,000 - 350,000
200,000
Urdaneta
Village
160,000 - 250,000
180,000
Bel-Air
Village
70,000 - 180,000
120,000
Salcedo Village
1 Bedroom
40k-60k
50k
2 Bedroom 110 - 150
40 - 80
80k-120k
100k
3 Bedroom 150 - 250
90k-150k
120k
40k-60k
50k
2 Bedroom 122 - 160
80k-120k
100k
3 Bedroom 265 - 285
90k-150k
130k
Apartment Ridge
1 Bedroom
77– 122
Rockwell Center
1 Bedroom
75-85
70k-85k
80k
2 Bedroom
125-157
100k-130k
115k
3 Bedroom
197-247
145k-180k
160k
65k-85k
70k
Bonifacio Global City
1 Bedroom
50-76
2 Bedroom
93-157
80k-130k
105k
3 Bedroom
140-306
130k-200k
165k
* Recent developments have prompted us to defer
the use of size as a criterion in measuring lease
rates for houses in these upscale communities.
Extensive renovations done on a number of smaller
houses in these communities have resulted in some
of them fetching higher lease rates compared to
their bigger but older counterparts.
CBRE Property Market View | Page 6
Definition of Luxury
Luxury condominium developments should be located in the heart of a major CBD or alternative CBD and have no more than 4 units per floor with a
minimum unit size of 280 sqms (3,034 sf). Units should have 3 or 4 bedrooms, a fully equipped gourmet kitchen, centralized air-conditioning, and
high quality finishes. In addition, the development should offer all of the
amenities expected of a 5 star hotel while the condominium building itself
should be surrounded by ample green space and open areas.
For a home to be considered luxury, it should be located in close proximity
(distance or travel time) to a major CBD or alternative CBD on a lot that is
at least 1,000 sqms (10,764 sf) in size with the house itself taking up no
more than 30% to 40% of this space. The village or development where the
home is located should be well secured and have amenities (or be located
in close proximity to amenities) such as a club house.
Residential Sub-Markets
Makati CBD & Fringe Areas. The Makati CBD is the Philippine financial
capital and the most prestigious business and residential address in the
country as most foreign embassies, international banks, and multinational
companies have a presence there. Up-scale condominiums within the CBD
are concentrated in Salcedo Village and between Ayala/Makati Avenue and
Apartment Ridge Street, while additional offerings are scattered about
Legaspi Village in the vicinity of the Greenbelt shopping and entertainment
complex. On the fringes of the CBD are two areas with additional upscale
condominium offerings: 1) Rockwell Center, a fully self contained community with shopping, club, and entertainment amenities, and the 2) Bonifacio
Global City, also known as the school hub since most of Manila‟s international schools are located there.
Major Residential Neighborhoods – Makati CBD & Fringe Areas
4h
3h
2c
3c
5c
5h
1h
2h
Economic Overview
kept .
(cont. from p.1)
Condo Classifications
Luxury, A, B, & C.
Lease Term
Typically 1 year. Most landlords do not accept a lease
term of less than a year.
Rental Deposit
Two months gross rental as a security deposit.
Rental Payment
One year of rent is normally paid up front but this is
negotiable in some instances depending on how flexible the landlord is.
Gross Rent
Inclusive of maintenance charges. Gross rent is usually
broken up into rental of premises, common area maintenance dues/service or maintenance charge, & Value
Added Tax (VAT).
Stamp Duty
Stamp duty is paid on a lease agreement and the
landlord is normally responsible for the payment of
stamp duty.
VAT Taxes
12% of gross sale or lease price on the property.
Normally, landlords are VAT-registered and pass on the
tax liability to their tenants.
Furnishings
Luxury housing landlords usually offer their premises for
rent unfurnished. Tenants can expect condominium
units to be either semi-furnished or furnished.
4c
1c
The following are the most important features of residential tenancy in the Philippine real estate market:
Located on the fringes of the Makati CBD,
Forbes Park and Dasmariñas Village are the
country‟s most exclusive residential villages
containing large detached homes on lots that
range in size from 600 to 3,000 sqms (6,458
to 32,292 sf). These neighbourhoods are the
preferred options by expatriates seeking residential housing while villages such as Urdaneta, Bel-air, San Lorenzo are secondary
choices.
CBRE Property Market View | Page 7
Metro Manila Retail Property Market
While the other property segments
have been affected by the global
financial slump, the retail industry
shows otherwise. With rising OFW
remittances, which were noted to be
growing by 2.58% y-o-y in April
2009, higher consumer spending
has been anticipated. On top of
this, there is also a continuous development of retail infrastructures and
expansions among convenience
stores as well as stand-alone shops.
There is currently about 3.5 million
square meters of retail space across
Metro Manila. Rental rates and occupancies are seen to be stable since
malls and commercial centers are in
“business as usual” mode. In spite of
the economic distress, a lot of people
still go to stores and spend on what
they need. Though some have cut
down on their purchases, increasing
population might have compensated
on this. Moreover, families in the
high class can still afford high end
products as they could, a few years
back. Furthermore, there are still a
great number of young professionals
whose buying power is boosted by
the growing BPO industry. These are
the reasons why the retail sector
doesn‟t seem to be much affected by
the economic catastrophe.
Given the current situation of the
market, leasing rates and occupancy
levels are expected to stabilize
throughout the year. Though there
isn‟t much news on expansions of
major malls, demand for more retail
space is seen to recover once the
global economy alleviates.
In the second quarter of 2009, Glori-
etta 1 and 2 were closed to make
way for the renovation of the mall,
which will start in the third quarter.
It‟s been gathered that a mixed-use
development will rise in the area,
consisting of fresh flagship stores
and new concepts from their existing
tenants. It is also in the same period
when Anchor Land disclosed its
plans of putting up a P300-million
worth of commercial facility in Baclaran. This will be called “One Shopping Center”, which will be a shopping destination similar to the 168
mall in Manila. Apart from these,
convenience stores such as Seven
Eleven and Ministop have already
started their plans of opening more
outlets within and outside Metro Manila. Meanwhile, local stand alone
restaurants and food stalls are also
expanding since they were observed
to benefit from softening food prices
and casual dining customers who
are looking for cheaper alternatives
because of the crisis.
Looking ahead, Southgate Mall by
Alphaland will have its soft opening
in August this year which will contribute around 18,000 square meters of
office space, a larger chunk or almost 80% of which has already been
taken. Another commercial center is
expected to open in Eton Cyberpod
located in Ortigas in the same quarter. This will be known as E-Life
which is designed to be a one-stop
digital hub for electronic gadgets,
cellphone, and computer fanatics.
Metro Manila Retail Property Outlook
Mall developers seem unfazed by
the .
MAKATI CBD and BONIFACIO GLOBAL CITY
Existing Stock:
462,592 sqm.
Rental Levels:
PhP600 to PhP1,600
New Supply
No new supply
Major Malls
Glorietta, Greenbelt, Market! Market!!,
Bonifacio High Street, Shops at Serendra
ORTIGAS CBD
Existing Stock:
811,642 sqm.
Rental Levels:
PhP550 to PhP1,200
New Supply
No new supply
Major Malls /Retail Centers
SM Megamall, EDSA Shangri-La Plaza,
Robinsons Galleria, The Podium
ROCKWELL CENTER
Existing Stock:
81,818 sqm.
Rental Levels:
PhP700 to PhP1,000
New Supply
No new supply
Major Malls
Power Plant Mall
ALABANG
Existing Stock:
723,597 sqm.
Rental Levels:
PhP375 to PhP775
New Supply
No new supply
Major Malls
Metropolis Star, Festival Mall, Alabang
Town Center, SM City Southmall
EASTWOOD CITY
Existing Stock:
22,750 sqm.
Rental Levels:
PhP800 to PhP1,000
New Supply
No new supply
Major Malls /Retail Centers
Eastwood Citywalk 1 and 2, Eastwood
Mall
QUEZON CITY
Existing Stock:
646,824 sqm.
Rental Levels:
PhP600 to PhP1200
New Supply
SM Sky Garden
Major Malls
SM North EDSA, Gateway Mall, TriNoMa
BAY CITY and ERMITA
Existing Stock:
726,493 sqm.
Rental Levels:
PhP400 to PhP800
New Supply
No new supply
Major Malls
SM Mall of Asia, Robinsons Place, SM
City Manila
Metro Manila Retail Market
Supply
Demand
Vacancy
Prime Rents
1Q09
Up
Up
Neutral
Up
4Q08
Up
Up
Neutral
Up
CBRE Property Market View | Page 8
Major Retail Districts
The Makati CBD. Developed by the Ayala family, the Makati CBD is the financial and commercial heart of the Philippines and contains the headquarters of many banks, multinational corporations, and big local corporations.
The district hosts the country‟s premiere retail facility, the Ayala Center composed of the Glorietta and Greenbelt shopping complexes.
Ortigas Center. Developed in part by the Ortigas Co. 8 kilometers North of
Makati, the Ortigas Center is the second most important commercial and
business district in the country. The Ortigas district is also a major shopping
destination containing a number of major shopping malls in the country
which include the SM Megamall, The Shangrila Plaza, Robinsons Galleria
and The Podium. Also found in the district is the Greenhills Shopping Complex, one of the oldest shopping complexes in the metropolis and Frontera
Verde. Both developments were spearheaded by the Ortigas Co.
Eastwood City. This 15-hectare mixed-use community is being developed by
Megaworld Corp. and was the first approved IT Park in the country. The development boasts of having been the first ever accredited Tourism Entertainment Complex by the Department of Tourism. It integrates the Citiwalk and
the Cyber & Fashion mall with the Eastwood Mall to form the retail facilities
which will complement the office and residential developments within.
Alabang. Filinvest Corporate City is a 244-hectare mixed use community
developed by the Filinvest Development Corp. (FDC) while the Madrigal
Business Park is a 25-hectare joint development by the Madrigal family &
Ayala Land. Two major malls can be found in the area, The Alabang Town
Center by Ayala Land and the Festival Mall by Filinvest. Other malls in the
area are the Metropolis Star and South Station.
Bonifacio Global City. Also known as Fort Bonifacio, this 214-hectare integrated community on the fringes of the Makati CBD is being developed by
the Fort Bonifacio Development Corp. (FBDC) as an extension to the Makati
CBD. The major retail facilities in the district are the Market!Market! Mall
and the upscale Bonifacio High Street and Serendra which were developed
by Ayala Land.
Rockwell Center. This 15.5-hectare upscale self-contained community on the
fringes of the Makati CBD was developed by Rockwell Land Corp. (RLC),
part of the Lopez Group of companies, on the site previously occupied by
the Rockwell Power Plant. The upscale retail mall is aptly named the power
Plant Mall.
Bay Area: The Bay Area contains the Aseana Business Park and SM Bay City,
which is the site of the country‟s largest shopping mall complex, SM Mall of
Asia. Smaller strip malls can also be found within the area together with the
World Trade Center, one of the preferred exhibit sites in the metropolis.
Araneta Center (Cubao): Located in Cubao (Quezon City), the Araneta Center is a 35-hectare commercial shopping, entertainment, and transportation
hub developed by the Araneta family is one of the country‟s oldest shopping districts. It is home to the country‟s first retail mall, Ali Mall and is currently undergoing a redevelopment program which included the completion
of the transport oriented Gateway Mall.
Quezon City North Triangle Area : With a land area of over 50 hectares,
the Quezon City North Triangle area is the site of two of the countries biggest shopping malls, the SM City North EDSA and Ayala Land‟s Trinoma
(Triangle North of Manila). The area is part of the proposed 250 Quezon
City Central Business District development.
TERMINOLOGY:
The Retail Trade Act of 2000.
This act opened the retail market to foreign retailers. Foreign ownership of as much as 100% is
allowed under the law depending on the capitalization of the business and subject to certain terms
and conditions. Foreign retailers not dealing
exclusively in luxury goods must, however, source
at least 30% of their stock inventory, by value,
locally for the first ten years after the law's effective date. Foreign retailers selling luxury products
must have at least 10% of their inventory consisting of products assembled in the Philippines.
LEASE LENGTH
Leases are typically for 1 year while leases for an
anchor tenant are 3 to 5 years in length. Shortterm leasing of retail space is generally not possible.
REQUIRED DEPOSIT & ADVANCE
2 to 3 months deposit on rent plus service
charges, monthly rent payment, and a fit-out
deposit
RENT QUOTATIONS
Rental rates consist of 2 components: 1) A basic
rent based upon the amount per sqm rented and
2) a percentage of the retailer’s revenue.
SUCCEEDING RENTAL
Rent is usually paid monthly in advance.
RESTORATION
Shopping mall space is rented out as bare shell
and is returned as bare shell at the end of the
lease.
CBRE Property Market View | Page 9
Philippines Industrial Property Market
The slump in exports demand has
restrained the levels of investment
activities in the industrial sector. For
the first two months of the second
quarter, Philippine exports posted a
31% decline year-on-year even as
demand in the electronics sector
showed a slight rebound towards the
end of the first quarter. With the
cautious stance of investors on
spending, the second quarter saw a
softened market sentiment. Positive
developments, however, are seen on
the strong interests for logistics and
continuing needs for storage facilities and specialized warehouses.
The downtrend in the local industrial
market has resulted to a setback on
the levels of production, size of inventory and level of employment. As
the sector is tied to the performance
of exports, the demand for industrial
space was limited. The constraints in
demand induced asking rates on lots
and buildings to remain unchanged.
After the closure of chipmaker Intel
and the pullout of logistics company
FedEx, another strike to the local
industrial sector is the decision of
Triumph International to cease its
manufacturing operations and shut
down its distribution center. The
move to close the factories of Triumph International (Philippines) Inc.
and Star Performance Inc. in Taguig
is set to affect the employment of
around 1,600 employees. Triumph‟s
operations have been adversely affected by the downturn in consumer
spending brought about by the
worldwide slowdown of economies
prompting it to restructure its operations.
Lot sales and lease transactions on
economic zones and industrial parks
during the quarter were mainly expansions on facilities of existing locators. Despite industrial investors
being wary of their returns, bright
prospects are seen on the major
hubs of Subic Bay and Clark Freeport Zone. Following the unveiling of
Hitachi Terminals Mechatronics Philippines Corp. of its newly constructed warehouse at the start of
the quarter, another company has
expressed intentions to expand.
Koryo Subic Inc., a manufacturer
engaged in the production of
molded plastics for electronics products has also planned to construct a
new building adjacent to its existing
factory. The upcoming P180 million
painting facility which will be more
advanced is intended to attract new
clients and increase its existing level
of job orders.
SUBIC BAY FREEPORT
Metro-Manila : 130 Kms (68 Miles) / 2.5 Hours
Size
Airport :
2.7Kms (1.7 Miles)/700 passengers at any given time
Power
: 130 mws
Water
: 33k cubic meters/day
Telco Provider: Subictel (PLDT)
Lease Rate
At the Clark Special Economic, the
construction of Global Gateway Logistics City developed by KGL investments and Peregrine is underway.
The development which is master
planned to be a fully-integrated,
mixed-use multidisciplinary city is
comprised of 1.67 million square
meters of prime lot. With the project,
a Logistics Park for warehousing,
distribution and light manufacturing
will rise together with a Town Center
for retail, a Campus for research
and development, modeling and
simulation, IT and centers of higher
learning and a Business Park for
office leasing. The industrial park is
highlighted by its quick access on
major roads being situated at the
interchange of the North Luzon Expressway and Subic-Clark-Tarlac
Expressway. Upon its completion,
the development is expected to be
the biggest single logistics hub in the
country.
As Clark‟s 4,400-hectare main zone
is nearing its full saturation, plans
are set to transform the sub zone of
Clark into what will be known as the
Next Frontier. The planned 10,000hectare mixed-use development
which is seen to generate 47,000
jobs will provide new areas for industrial investments. Complementing
the Next Frontier development are
the 1.8-kilometer Spine Road and
the 4.5-kilometer East Road 2 that
will link the area to Mac Arthur
Highway.
: 67,000 hectares / 165,560 acres
Port Capacity :
15 Operational Piers /100k TEU Capacity
(600k TEU Capacity by 2007)/15 m Depth (49 ft)
: US$0.40 - US$1.50 /sqm*
US$2.00 - US$20.00/sqm* Factory Bldg.
Some Industrial & Business Park
Subic Bay Industrial Park & the Subic Techno Park
CLARK SPECIAL ECONOMIC ZONE
Metro Manila : 80 Kms (50 Miles) / 1+Hour
Size
: 33,653 Hectare / 83,158 Acres
Airport :
3.2Km (2 mile) runway/1.5M passenger capacity
(3.5M in 2007)
Power
: 50mws + External
Water
: Max 40k cubic meters/day (2010)
Telco Providers : PLDT & Digitel
Lease Rate :
US$ 0.30 /sqm (Main Zone Lot)*
PhP5,000 - PhP20,000 /ha (Sub Zone Lot)*
US$1.00 - US$4.00 /sqm (SFB)*
Some Industrial & Business Parks
BerthaPhil Business Park, Clark Premiere Industrial Park,
and the PhilExcel Business Park
CALABARZON
Metro-Manila :110 Kms (68 Miles) /
2+Hour Drive to Batangas
Port (Batangas) : 3 piers /4-7 meter depth (13-23 ft)
Power
: Varies by Location
Water
: Varies by Location
Telco Providers : Varies by Location (PLDT etc.)
Selling Rate
Lease Rate
: PhP2,300 - PhP4,500 /sqm (Lot)
: PhP46 - PhP76 /sqm (Lot)*
US$2 - US$6 /sqm (SFB)*
Some Industrial & Business Parks
Calamba Premiere Int‟l Park, Carmelray Industrial Park
(I & II), Cavite Export Processing Zone, First Cavite
Industrial Estate, First Philippine Industrial Park, Gateway Industrial Park, Greenfield Automotive Park, Laguna International Industrial Park, Laguna Technopark,
Light Industry & Science Park (I, II, & III), Lima Technology Center, and Philtown Industrial Park
CEBU
Metro-Manila
: 569 kms (354 miles ) / 1 Hour Flight
Port Capacity
: 1 M TEU Capacity /
9.5 Meter Depth (31 ft)
Airport
: 3.7 Km (2.3 Mile) Runway /
2.5+ M Passengers
Power (Province) : 302 mwh Capacity
Water (Metro Cebu) : 140k cubic meters/day
Telco Providers : Innove, DTS, Innove, TMSI,
Sotelco, & Countrywide Telecom
Selling Rate
Lease Rate
: PhP3,000 /sqm (Lot)
: PhP18 - PhP50 /sqm (Lot)*
US$2.50 - US$3.50 /sqm (SFB)
Some Industrial & Business Parks
Cebu Light Industrial Park, Mactan Export Processing
Zone II, Mira Nila Ecozone, Polambato-Bogo Economic
Zone, South Road Properties (SRP), Taft IT Zone, and
West Cebu Industrial Park Special Economic Zone.
* Lease rate per month
SFB (Standard Factory Building)
CBRE Property Market View | Page 10
Industrial Property Outlook
Growth on industrial operations is
currently leaning towards the information technology sector. The Philippine Economic Zone Authority has
recorded a surge in investments for
information technology projects.
Included on the anticipated investments are the expansions of Ionics
EMS Inc. and NSG Microoptics
Manufacture and Claymount Assembly, the plant improvement of Integrated Microelctronics Inc., and the
additional P109.535 million outlay
of Toshiba Information Equipment
Philippines Inc. for its production of
solid state devices at its plant in Laguna Techno Park.
The local government has increased
its involvement to continuously devise ways reducing the burden on
the industrial sector. Provincial officials in Batangas are pushing to cut
real property values on industrial
estates to lower realty tax payments.
The recommendation will benefit
industrial parks housing light to medium industries such as the First Philippine Industrial Park and Lima
Technology Center.
Bleak prospects for the industrial
property market are expected to persist. Though demand on the manufacturing sector is still posting weak
results, the electronics sector is seeing a slow recovery with better
month-on-month figures on revenues towards the start of the second
quarter. Production is seen to be
stimulated by the re-stocking of
companies of depleted inventories
after having slowed down on operations on the previous months. Until
the levels of production, inventory
and employment have significantly
increased the asking rates for industrial space is expected to remain
stable.
TERMINOLOGY:
LAND OWNERSHIP
Generally (with some exceptions) only for
Filipino citizens and corporations that have at
least 60% of the capital owned by Filipinos.
LAND LEASES
Foreign companies investing in the Philippines can lease land for 50 years and renew
the lease once for another 25 years.
DTI
The Department of Trade and Industry (DTI)
BOI
The Philippine Board of Investments (BOI)
PEZA
Philippine Economic Zone Authority
BCDA
Bases Conversion Development Authority
CDC
Clark Development Corporation
SBMA
Subic Bay Metropolitan Association
INDUSTRIAL PROPERTY UPDATE
Cautious Optimism ... (cont. from p.1)
existing portfolios on the said resort
island destinations.
y.
Subic Bay Freeport Zone
Demand
Capital Value
Rents
Clark Freeport Zone
(continued in page 11)
Demand
Capital Value
Rents
Calabarzon
Demand
Capital Value
Rents
Cebu
Demand
Capital Value
Rents
1Q09
4Q08
1Q09
4Q08
Up
n.a.
Neutral
Up
n.a.
Neutral
Up
n.a.
Neutral
Up
n.a.
Neutral
1Q09
4Q08
1Q09
4Q08
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
Neutral
CBRE Property Market View | Page 11
ABOUT CB RICHARD ELLIS PHILIPPINES
CB Richard Ellis is the largest, vertically integrated commercial real estate services firm in the world. With headquarters
in Los Angeles, it has more than 356 principal offices in 58 countries worldwide and employs over 19,500 real estate
professionals. In the Philippines, CB Richard Ellis is the leading real estate service provider offering the most comprehensive and highest level of professional services in the country.
At CB Richard Ellis, we are committed to using our extensive industry knowledge, consultative approach and vast pool of
resources to help clients maximize the value of their real estate assets. We assist owners belonging to a range of sizes
and classifications in developing solutions for office, residential, industrial, and commercial / retail assets. We provide a
custom mix of products and services to deliver measurable returns.
The firm has established its position as the market leader in the commercial brokerage services and undertakes a large
portion of Tenant Representation assignments for multi-national corporations who are entering or expanding operations
in the Philippines. CBRE has also facilitated the take-up of over 250,000 sqms (2.7 million sf) of space for call center/
BPOs. In addition, CBRE offers industrial and residential brokerage as an integral part of the full brokerage services offered to its clients.
The company is also aggressively expanding its involvement in Asset Services as it provides property management services for over 230,000 sqms (2.5 million sf) of prime commercial, residential, and mixed-use properties. This portfolio is
spread over major areas in Metro Manila, including Makati City, Ortigas Center, the Bonifacio Global City, and the City
of Manila. The company also renders Facilities Management services for over 20,000 sqms (215,000 sf) of real estate
for corporate clients and other large occupiers.
The company specializes in disposing banks‟ and SPVs‟ ROPOAs through public auctions. Since 2003, the company
had already conducted 43 auctions, successfully selling more than 1,500 properties nationwide amounting to over
Php1.8 billion.
The Research and Consultancy Department has an excellent track record providing professional advisory services to:
financial institutions, large domestic corporations, multinational corporations and government institutions, fund managers, international real estate funds, and investment banks.
CBRE offers a full range of services consistent with other Asian CB Richard Ellis offices and includes:
 Brokerage Services — Office, Residential, Industrial, Retail, Hotel and Leisure, Project Marketing, Cross Border
Investment.
Asset Services — Asset Management, Facilities Management, Project Management, Lease Management and Administration, Project and Technical Consultancy.
Property Management Services — Transaction Management, Project Management, Portfolio Management/Lease
Administration, Corporate Real Estate Finance, Strategic Planning and Consulting, International Services.
Financial Services — Research and Consulting, Project Valuation/ Appraisal, Feasibility Studies, Occupational Audit and Management, Portfolio strategies, Investment Advisory, Development Consultancy, Financial Due Diligence,
Investment Banking Support, Public Auctions
Cautious Optimism ... (cont. from p.10)
that.
CBRE Property MarketView | Page 12
For more information regarding the
MarketView, or our services, please
contact:
CB Richard Ellis Philippines, Inc.
Manila Office
10th Floor Ayala Tower One &
Exchange Plaza
Ayala Avenue, Makati City 1226
Phone: (632) 752-2580 / 848-7388
Fax: (632) 752-2571
Cebu Office
2nd Floor Waterfront Hotel and Casino
Salinas Drive Cebu City, Philippines
Phone: TBA
Fax: TBA
http://www.cbre.com
http://www.cbre.com.ph
Trent Frankum
[email protected]
General Manager
Joey Radovan
[email protected]
Global Corporate Services
Mike Mabutol
[email protected]
Investment Properties & Capital
Markets
Victor Asuncion
[email protected]
Global Research & Consultancy
Mabel Luna
[email protected]
Valuation & Advisory Services
Leighton Tsai
[email protected]
Asset, Property and Facilities
Management