PHILIPPINES: Real Estate Overview

PHILIPPINES: Real Estate Overview
LINDSAY ORR
JLL
Presentation Outline
1.
Office Outlook
2.
Residential Outlook
3.
Retail and Tourism Outlook
4.
Understanding the Bubble
5.
What makes the Philippines an attractive destination for
foreign investors?
Metro Manila Business Districts
North Sector
Central Business Sector
MAKATI
Makati CBD
Rockwell Center
Century City*
Circuit Makati*
PASIG
Ortigas Center
Rockwell Business Center
Frontera Verde
Woodside*
Capitol Commons*
TAGUIG
Bonifacio Global City
McKinley Hill
West Sector
PASAY
Newport City
SM Mall of Asia Complex
Metropolitan Business
Park*
PARAÑAQUE
Asiaworld City*
Aseana Business Park
MANILA
CityPlace
San Lazaro
Quezon City
Mandaluyong
Makati
Manila
Pasig
BGC
Pasay
Taguig
Paranaque
Alabang
QUEZON CITY
UP Techno Hub
Eastwood City
Eton Cyberpod Centris
Araneta Cyberpark
Brigdetown*
Nuvo*
Vertis North*
UP Town Center*
Fairview Terraces*
ALI Balintawak
MANDALUYONG
Edsa Central
Pioneer
South Sector
MUNTINLUPA
Filinvest Corporate City
Northgate Cyberzone
Madrigal Business Park
La Fuerza*
Alabang West
TAGUIG
Arca South*
Business districts (developed and
developing) with approximately
2,543 hectares of land area in
Metro Manila.
LAS PINAS
Portofino
Vista Hub
* Emerging Business Districts
Source: JLL Research & Consulting
Quarterly Supply vs. Pre-Commitments
Vacant Supply
Pipeline Supply
Leased / Pre-Committed
Total of 5,453,560 sqm supply
from 2009 – 2018F
sqm in ‘000
400
Average Demand Line
350
300
Oversupply Period
250
Rents
Stabilized
200
Temporary
supply
deficit
period
resulting in
rent
escalation
Rents increase
due to a high
level of leasing
activity
across all
districts
150
100
50
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
515,660 sqm.
243,800 sqm.
293,100 sqm.
362,600 sqm.
363,700 sqm.
571,400 sqm.
710,300 sqm.
954,600 sqm.
846,400 sqm.
592,000 sqm.
Current Vacancy across Metro Manila Business Districts
sqm in ‘000
1,400
Total vacancy rate of 4% across
all Metro Manila business districts
1,200
1,000
800
600
400
200
0
Vacant Supply
Leased
2014 Leasing Activity
40%
PRE-COM
40%
BY LOCATION
Quezon
City
13%
PRE-COMMITMENTS
SIGNED
LEASED
60%
OFFICE SPACE
LEASED
BY INDUSTRY
Alabang
9%
Bay City
6%
Ortigas
21%
Makati
13%
60%
TRANSACTED
Bonifacio
Global
City
37%
497,000
Sqm.
Vendor
BPO
41%
Captive
BPO
31%
Non BPO
28%
Source: JLL
Historical and Forecasted Rents
1400
1200
Asian
Financial
Crisis
Global
Financial
Crisis
PHP / SQM
1000
800
600
400
200
0
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F
Makati
BGC
QC
ALABANG
ORTIGAS
7
Average Office Rental Rates
Ave. Rent
Ave. Rent
(Php/sqm/mo)
(Php/sqm/mo)
DEC 2013
DEC 2014
Makati CBD - Prime
1,050
1,200
$23.33
$26.67
Makati Grade A - B
820
1,000
$18.22
$22.22
790
800
$17.56
$17.77
585
600
$13.00
$13.33
540
700
$12.00
$15/56
560
600
$12.44
$13.33
500
550
$11.62
$12.22
District
Bonifacio Global City
Ortigas
Quezon City
Alabang
Bay City
Increase
4Q 2013 – 4Q 2014
14%
22%
1%
2%
30%
7%
10%
Based on PHP1.00:$45.00 foreign exchange rate
Residential Outlook
Residential Outlook
Approximately
More than
204,270 units
145,390 units
completed in Metro
Manila from
1995-2014
to be completed in
Metro Manila from
2015-2020
Real estate loans
constitute 19% of
banks’ total loan
portfolio in 2014*
*(as of Jan 2015)
Source: BSP, JLL Research & Consulting
Annual Completions of Residential Condominiums
Mid-Range to High-End Supply in Metro Manila
60,000
Number of Condominium Units
Forecast Supply (2015E2020E): 145,390 units*
Existing Supply (1995-2014):
204,270 units
70,000
*Project completions may get delayed.
50,000
40,000
30,000
20,000
10,000
-
Completion
Year
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015E 2016E 2017E 2018E 2019E 2020E
Makati CBD
Bonifacio Global City
McKinley Hill
Ortigas
Quezon City
Alabang
Bay City
Newport City
Manila
Parañaque / Muntinlupa
Notes: (1) Figures are as of December 2014 and refer to mid-range to high-end residential condominium units in Metro Manila. Mid-range refers to units with typical selling prices of Php1.5M-10M, while
high-end refers to units with typical selling prices of above Php10 M. (2) Existing residential units are units completed from 1999 to 2014 while future residential units are new units that will be completed
from 2015 to 2020. (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, Alabang, and the cities of Parañaque and Muntinlupa
(outside Alabang).
Source: HLURB, Various brokers and developers, JLL Research & Consulting
Existing Residential Condominium Developments
Mid-Range to High-End Supply in Metro Manila
Share per District - 1995 to 2014
Parañaque /
Muntinlupa
8%
Newport City
2%
Manila/
Pasay
13%
Makati CBD &
Fringe
19%
Bonifacio Global
City / Taguig
11%
Bay City
3%
Alabang
2%
Quezon City
23%
Ortigas/ Pasig/
Mandaluyong
18%
Existing residential condominium
supply is at 204,270 units as of
end-2014.
McKinley Hill
1%
Notes: (1) Includes only mid-range and high-end residential condominium supply
(2) Figures are rounded off to the nearest tens
Source: HLURB, Various developers, JLL Research & Consulting
12
Future Residential Condominium Developments
Mid-Range to High-End Supply in Metro Manila
Newport City
1%
Bay City
9%
Parañaque /
Muntinlupa
Manila/
2%
Pasay
Makati CBD &
12%
Fringe
21%
Alabang
1%
Bonifacio Global
City / Taguig
13%
Quezon City
18%
Residential supply within the next
six years is expected to increase
by 145,390 units.
Ortigas/ Pasig/
Mandaluyong
21%
McKinley Hill
1%
Share per district – 2015E to 2020E
Notes: (1) Includes only mid-range and high-end residential condominium supply
(2) Figures are rounded off to the nearest tens
Source: HLURB, Various developers, JLL Research & Consulting
13
Retail and Tourism
Philippine Retail Market
9,000
Shopping Mall Supply per Region
351
8,000
Shopping Mall Supply (in thousand sqm)
7,000
6,000
Existing Mall Supply Nationwide (as of 2014) = 14.6
milion sqm
5,000
4,000
Future Mall Supply Nationwide (2015E-2017E) = 1.4
million sqm
7,825
3,000
119
2,000
1,000
0
559
192
2,065
94
1,326
535
Metro Manila Northern Luzon Central Luzon Southern Luzon
57
728
950
Western
Visayas
Central Visayas
Existing Supply
224
Northern
Mindanao
709
Davao
282
Other Mindanao
Future Supply
Notes: (1) Figures on the graph are in thousand sqm.
(2) Central Visayas figures include supply figures for Eastern Visayas; Northern Luzon includes Ilocos, CAR, Cagayan
Valley regions; Southern Luzon includes CALABARZON, MIMAROPA and Bicol regions; Other Mindanao includes
15
Zamboanga, SOCCSKSARGEN, CARAGA, and ARMM.
Philippine Retail Market
Existing Retail Mall Supply
Future Retail Mall Supply
(As of 2014)
(2015E-2017E)
Provincial
6.8 million sqm
47%
Metro Manila
0.4 million sqm
26%
Metro Manila
7.8 million sqm
53%
Provincial
1.0 million sqm
74%
Source: JLL Research & Consulting
16
Philippine Tourism Overview
Top 10 Source Markets (2014)
COUNTRY
Tourist Arrivals
South Korea
547,971
USA
389,432
China
226,163
Japan
220,366
Australia
111,687
Singapore
91,692
Canada
75,677
UK
68,593
Taiwan
67,213
Malaysia
66,791
4.8 million foreign
nationals arrived in the
Philippines
For 2014
Sources: http://www.tourism.gov.ph/Pages/IndustryPerformance.aspx
17
Philippine Tourism Overview (Hotel Pipeline)
Over 10,900 rooms
in the pipeline
Shangri-La
At the Fort
577 rooms
Marco Polo Manila
316 rooms
Grand Hyatt
Manila
438 rooms
Belle Grande
Manila Bay
1,000 rooms
2014
Worldhotel
and
Residences
401 rooms
Conrad Hotel
Manila
350 rooms
Citadines Manila
Bay Resorts
2050 rooms
Ascott
tba
2015
Novotel Manila
Araneta Center
415 rooms
Movenpick
Hotel
Manila
324 rooms
2016
Citadines Millenium
tba
Resorts World
Bayshore
3500 rooms
Sheraton Manila
350 rooms
2017
Savoy Hotel
610 rooms
Manila Bay
Resorts
tba
2018
The Westin Manila
600 rooms
Note: tba means “to be announced”
18
Understanding the Bubble
What constitutes a Bubble?
What is a BUBBLE?
When applied to
Property.
-
It is an
EXCESSIVELY
ABUNDANT
SUPPLY of Real
Estate, whether it be
Commercial, Retail
or Residential,
characterized by
highly inflated prices.
Supply is eventually
met
Massive sell-off
occurs
Drastic drop in
prices
Overbuilding of projects
Market slow down
Build-up in supply
Is there a BUBBLE happening in the Country?
NO, why?
•Supply is being matched by end user demand
•Developers are self-regulating start up of projects
•Intervention of BSP to curtail excessive exposure of
Banks to Real Estate
What makes the Philippines an attractive
destination for foreign investors?
Human Resource: Availability of Credible Labor
Availability of Human Resources – Labor Pool
362,557
100 M
Population
College Graduates
Nationwide (2011-2012)
TOTAL GRADUATES PER COURSE DIVISION
51,820
Business,
Economics
22,261
Law, Pre-law,
Public Ad
13,991
Accounting,
Finance
35,147
HRM,
Tourism,
Food related
51,694
4,790
2,947
Medicine &
Healthcare
54,650
46,686
1,349
7,742
7,601
61,879
Engineering,
Technology
Advancement
Liberal Arts,
Humanities
IT Related
Agriculture,
Fisheries, Husbandry
Architecture,
Interior Design
Religion,
Education
Language &
Communication
Nat'l Science
Cost Effective Labor Pool
Case Study: Voice BPO Annual Compensation per Annum
40,000
36,864
USD per ANNUM
35,000
30,000
23,188
25,000
20,000
15,000
10,000
5,000
5,325
7,773
10,102
11,587
0
Entry
Professional
Intermediate
Professional
Senior
Professional
Supervisor
Manager
Senior Manager
Voice Based Services
“Answers and initiates inbound and outbound voice based communications in English or other languages to support
customer care, telesales, credit and collections, and/or remote technical support for clients. Maintains and updates
records and databases in accordance with prescribed formats and system requirements”
Sources: Towers Watson
Regional Comparison of Real Estate: USD / SQM / PA
Affordable Rental Value
1,600.00
1,505.53
USD per SQM per ANNUM
1,400.00
1,200.00
986.47
1,000.00
800.00
720.24
600.00
467.43
400.00
200.00
194.23
229.83
Philippines
Malaysia
281.28
0.00
Thailand
Sydney
Beijing
Singapore
Hongkong
Philippines is 16% lower in office rental value compared to its
closest competitor – Malaysia.
Sources: JLL Asia Pacific Property Digest 4Q 2014
What Dissuades investors from investing?
Despite the many factors attracting investors to the country, there remain several roadblocks that
may potentially turn-off would-be investors
1. Ownership Restrictions – Foreigners cannot purchase property (land),
and cannot own more than 40% in businesses.
2. Leasehold Terms – 25 years leasehold, with an extension of another 25
years. Lease cannot be declared as 50 years straight.
3. Ease of Doing Business – despite several ranking improvements in the
last years, the Philippines remains inferior compared to it’s neighboring
countries in terms of easy business set-up.
CONCLUSION
•There is NO Imminent Bubble
•Economic Indicators for the Philippines remain sound
with continuing prospects for growth.
•Property demand drivers (OFW Remittances & BPO
Revenue) are forecast to grow over the next few years
fuelling further growth in the Property Sector.
Who We Are, What We Do
Sales and Leasing
Research, Consultancy and Valuation
Project Management
Facilities and Property Management
(2014)
- Transactions accounted for every 60% market share in Grade A office
leasing Market
- Transacted approximately 92% of office space in Bonifacio Global
City
- Servicing 8 of the top 10 BPOs in the Philippines.
- Acquired over 130 sites for more than 50 contact center clients
- Serviced around 60% of all office space occupied by the BPO industry
- Negotiated about 110,000sqm of build-to-suit buildings, and about
80% of BPO Office Lease transaction outside Metro Manila
- Secured 25 new sole agency appointments for commercial buildings
- Advised on 17 property dispositions with a combined value of Php 747M
- Managed 27 buildings and around 400,000sqm in facilities management
28
Thank you
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