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Colliers Quarterly Property Market Report

Manila

1Q 2016 May 2016

Copyright © 2015 Colliers International.

The information contained herein has been obtained from sources

deemed reliable. While every reasonable effort has been made to

ensure its accuracy, we cannot guarantee it. No responsibility is

assumed for any inaccuracies. Readers are encouraged to consult

their professional advisors prior to acting on any of the material

contained in this report.

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Strong macroeconomic fundamentals continue to support

the growth of the real estate sector, with continuously

robust demand from the BPO market tempering the effects

of high levels of office space completions. The retail

property sector remains stable on the back of steadily

improving purchasing power and consumer confidence.

Meanwhile the residential condominium sector begins to

show some strain in the face of a deluge of new condo

stock.

Forecast at a glance

Demand BPO demand to continue rising at double digit rates, while residential condo demand will grow steadily in step with a growing economy. Retail may become more challenging as a sharp increase in new shopping center space is anticipated in 2016.

Supply Office supply forecasted by the end of 2016 has slipped, but 2016 will still see an all-time high in new supply. Residential condo and retail stock will also rise at elevated rates.

Vacancy rate

Significant delays in office completions for 2016 will keep vacancies at low levels. On the other hand, Colliers sees residential condominium and retail vacancy rates climbing gradually in the next twelve months.

Rent Colliers projects office rents to increase at the same historical growth rates given the pace of demand. Retail rents are also seen to grow steadily. However, condo rents have begun to slide amid a record number of completions this year.

The Philippine economy grew by 6.9% in the first quarter

of 2016. The growth was primarily driven by increased

investments and household expenditures, as well as a rise

in public infrastructure spending. Major credit rating firms

and multilateral aid agencies are projecting GDP growth

between 6% and 6.4% this year.

Office

Vacancies fell further despite the completion of seven

buildings during the first quarter of 2016, which added

some 156,000 sq m of office space in Metro Manila. With

an estimated 640,000 sq m of new office space expected

to be completed this year, a slight increase in office space

vacancy across the major business districts of Metro

Manila is anticipated. The increase, however, will be

tempered by steady demand for office space fueled by

BPO companies.

Residential Only three residential projects were completed in Metro

Manila during the first three months of the year, all located

in Fort Bonifacio. For the rest of the year, Colliers expects

that an additional 11,700 units will be delivered in the

major CBDs, with half of the new units located in Fort

Bonifacio. With the delivery of these new units over the

next 12 months, rental rates in the major districts are

expected to decline.

Retail Metro Manila retail stock reached a total of 6.12 million as

of the first quarter of 2016. Retail projects completed

during the past six months include Circuit Lane Makati, SM

Center Sagandaan, Uptown Parade Mall, Uptown Mall,

and the retail podium of Shangri-La at the Fort. Rising

household incomes due to expanding Business Process

Outsourcing (BPO) and manufacturing sectors, robust

OFW remittances, a low inflationary environment,

increasing employment opportunities, and stable political

conditions all point to a positive medium term outlook for

the Philippine retail sector.

Office sector drives property market growth

Julius Guevara | Director | Research & Advisory

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2 Colliers Quarterly Market Report | 1Q 2016 | Colliers International | Manila

Economy up 6.9% in 1Q 2016 The Philippine economy grew by 6.9% in the first quarter

of 2016, faster than the 5% growth recorded in the same

period last year. The growth was primarily driven by

increased investments and household expenditures; and

ramped up public infrastructure spending. Fixed capital

formation, which represents combined domestic and

foreign investments, soared by 23.8% YoY. Household

consumption, which accounts for three-fourths of the

country’s GDP, rose by 7%; while public construction,

mainly driven by election-related spending, posted an

outstanding growth of 40%, a huge turnaround from a

23% contraction recorded in the same period in 2015.

The industry sector grew at a faster rate of 8.7% on the

back of robust mining (+11.3%), construction (+10.8%),

and manufacturing (+8.1%) subsectors. The services

sector posted a 7.9% growth while agriculture declined

by 4.4% due to the adverse effects of El Niño

phenomenon.

Inflation rose to 1.1% for the first three months of the

year from 1% in 4Q 2015. Despite this, the inflation rate

for the period under review is still below the low end of

the government’s announced annual inflation target of 2-

4% for 2016-2018.

The country’s employment rate has been improving

given the increase in the number of jobs created due to

the resurgence of the manufacturing sector; continual

demand for BPO employees as existing firms expand

while more companies establish operations in the

country; and ramped-up infrastructure spending partly

fueled by election-related expenditures. Results of the

Philippine Statistics Authority’s (PSA) January 2016

Labor Force Survey (LFS) showed that the number of

employed Filipinos rose from 38.4 million in January

2015 to 39.2 million in January 2016. The number of

manufacturing and construction-related jobs rose by

800,000 YoY to 6.43 million while the wholesale and

retail trade subsector employed 7.55 million workers in

2015 from 7.06 million in the previous year.

Meanwhile, the total employees under the

accommodation and food service activities group

reached 1.79 million from 1.70 million a year ago. The

demand for additional jobs in the latter was partly driven

by increased spending from both foreign and local

tourists and the Filipinos’ rising preference for dining out

which is greatly influenced by their evolving working

practices.

Major economic growth drivers for 2016 include the

implementation of major infrastructure projects

particularly those under the public-private partnership

(PPP) program; new manufacturing projects from China,

Japan, and other Southeast Asian economies; continued

remittance and BPO revenue growth; lower fuel prices;

and election-related spending.

Economic Indicators

Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q 2016

Gross National Product 6.10 6.00 6.50 8.40 3.20 6.40 7.50 5.80 5.80 7.60

Gross Domestic Product a 6.60 4.20 1.10 7.60 3.90 6.80 7.20 6.10 5.90 6.90

Household Final Consumption Expenditure 4.60 3.70 2.30 3.40 6.10 6.60 5.70 5.40 6.30 7.00

Government Final Consumption Expenditure 6.90 0.30 10.90 4.00 1.00 15.50 7.70 1.70 7.80 10.00

Capital Formation -0.50 23.40 -8.70 31.60 8.10 -5.30 29.90 5.40 15.10 23.80

Exports 6.70 -2.70 -7.80 21.00 -4.20 8.50 -1.10 11.30 9.00 6.60

Imports 1.70 1.60 -8.10 22.50 0.20 4.90 5.40 8.70 14.00 16.20

AHFF b 4.70 3.20 -0.70 -0.20 2.70 2.80 1.10 1.60 0.10 -4.40

Industry 5.80 4.80 -1.90 11.60 2.30 7.30 9.30 7.90 6.00 8.70

Services 7.60 4.00 3.40 7.20 5.10 7.40 7.20 5.90 6.80 7.90

Average Inflation c 2.90 8.30 4.10 3.90 4.60 3.20 3.00 4.10 1.40 1.10

Budget Surplus/Deficit (PHP Bn) -12.40 -68.10 -298.50 -314.40 -197.70 -242.80 -164.10 -73.09 -121.70 -3.47 d

PHP:US$ (Average) 46.10 44.70 47.60 45.10 43.31 42.09 42.45 44.40 45.40 47.29

Average 91-Day T-Bill Rates (%) 3.40 5.20 4.00 3.70 1.37 1.58 0.32 1.24 1.80 1.56

Source: Philippine Statistics Authority, Bangko Sentral ng Pilipinas, Bureau of the Treasury

aat constant 2000 prices

bAgriculture, Hunting, Forestry, Fishing

cat constant 2006 prices

das of January 2016

*revised figures

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OFW remittances for the first two months of the year

reached USD 4.6 billion, up 6.1% from USD 4.3 billion

recorded in the same period last year. Analysts are

confident that OFW remittances will weather the adverse

effects of the oil price reductions on the Gulf economies.

The central bank is projecting a 4% growth in

remittances for this year.

Major credit rating firms, foreign banks and multilateral

aid agencies are projecting a GDP growth of between

6% and 6.4% this year. Under the Aquino presidency

GDP growth was at 6.2% per annum, the fastest

recorded in the past 40 years. Despite this the economic

growth has not been inclusive, with the Philippines

having the highest unemployment and poverty rates

amongst ASEAN-6.

The Philippine peso (PHP) continued to depreciate

against the U.S. dollar (USD) during the first three

months of the year, reaching PHP47.3 from PHP45.5 at

the end of 2015. Consensus forecasts put exchange

rates at a higher PHP46 to PHP47 range by end-2016.

Among the factors seen to temper depreciation

pressures this year are foreign exchange inflows from

OFW remittances, BPO revenues, tourism receipts, and

foreign direct investments.

In 2015, Filipinos working abroad remitted a total of

USD28.5 billion, up 4.4% than the previous year’s level

and exceeding the central bank’s projection of 4%

growth for 2015. For this year the central bank is also

expecting OFW remittances to grow by 4% on the back

of steady deployment of Filipino workers, greater

diversification of country destinations, and shift to higher-

skilled types of work. OFW remittances are expected to

weather the adverse effects of the oil price slowdown.

OFW Remittances*

Source: Bangko Sentral ng Pilipinas *as of February 2016

Strong macroeconomic fundamentals continue to

support the increased appetite for real estate loans,

which grew by 26% from PHP1.04 trillion in December

2014 to PHP1.31 trillion at the end of December 2015.

The proportion of non-performing real estate loans

declined to 2.08% as of the fourth quarter of 2015 from

2.47% in December 2014. By end-2015, real estate

loans for commercial use represented two-thirds of the

total or PHP860.49 billion while residential loans covered

the remaining 33% or PHP446.12 billion.

Land values to grow between 5%

and 7% in the next twelve months Land Values

Source: Colliers International Philippines Research

Land values in major business districts continue to

increase. Land values in Makati CBD averaged

PHP523,000 per sq m during the first quarter of 2016, up

by 4.6% QoQ. This is slower than the 7.9% growth

recorded in the fourth quarter of 2015. Land values also

accelerated in Alabang, Fort Bonifacio, and Ortigas.

The value of land in Fort Bonifacio averaged

PHP445,000 per sq m, up by 6.7% QoQ. The value of

Alabang lots recorded the fastest growth at 4.6% to

PHP123,000 per sq m from PHP117,946 in the previous

quarter. Prices in Ortigas Center averaged PHP189,000,

up by 5.3% QoQ, up from 4% growth posted in the

previous quarter. Land values in the major CBDs are

projected to grow between 5% and 7% over the next 12

months.

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Comparative Land Values (PHP / sq m)

LOCATION 4Q 2015 1Q 2016 % CHANGE (QoQ) 1Q 2017F %CHANGE (YoY)

Makati CBD 363,000 - 637,000 378,000 - 668,000 4.59 404,000 - 715,000 6.93

Fort Bonifacio 292,000 - 542,000 315,000 - 575,000 6.70 336,000 - 612,000 6.49

Ortigas Center 135,200 - 223,700 141,000 - 237,000 5.25 150,000 - 252,000 6.36


Compliance with balanced housing

requirement drives property license

applications

The total number of licenses to sell issued by the

Housing and Land Use Regulatory Board (HLURB) for

the first quarter of 2016 grew by 77% to 85,470 from

48,411 during the same period last year. Growth was

recorded across all segments, except for Farmlot and

Industrial Subdivision categories as no applications were

recorded during the period under review.

The number of units applied for by developers to comply

with the balanced housing unit requirement was a major

contributor to the growth, rising by 414% YoY to 9,104

from a mere 1,772 in the same period last year. This

indicates that developers of main subdivision projects

are now more aggressive in complying with the

government’s requirement of developing an area for

socialized housing equivalent to at least 20% of the total

subdivision area.

Other segments that registered robust growth include

Open Market Housing (+232%), Low-Cost Condominium

(+181%), and Commercial Subdivision (+124%).

Socialized Housing recorded an 81% growth YoY, with

the number of new applications for the first three months

doubled to 1,566 units from 795 while those in the

Economic housing grew by a modest 44% to 13,845

units. Applications under the Commercial Condominium

segment barely changed from 972 units to 991. This is

far from the growth recorded under the same segment in

the 1st quarter of 2015 where applications rose by

almost two-fold to 972 units from 336. The number of

new applications under memorial parks category soared

by 93% to 21,459 units from 11,097.

HLURB Licenses to Sell

Source: Housing and Land Use Regulatory Board

HLURB Licenses to Sell

SEGMENT JAN – MAR '15 JAN - MAR '16 % CHANGE (YoY)

Balanced Housing Compliance Units 01,772 09,104 414

Socialized Housing 03,763 06,816 081

Economic Housing 09,637 13,845 044

Mid-Income Housing 00,795 01,566 097

Open Market Housing 03,589 11,904 232

Low-Cost Condominium 00,486 01,365 181

Mid- and High-End Condominium 10,820 12,805 018

Commercial Condominium 00,972 00,991 002

Farmlot 00,040 - -100

Memorial Park 11,097 21,459 093

Industrial Subdivision 00,019 - -100

Commercial Subdivision 00,063 00,141 124

TOTAL (Philippines) 48,411 85,470 077

Source: Housing and Land Use Regulatory Board

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Office Fort Bonifacio accounts for bulk of

new office supply

Seven buildings were completed during the first quarter

of 2016, adding some 156,000 sq m of office space in

Metro Manila. Three buildings were completed in Fort

Bonifacio that delivered an additional 81,700 sq m of

office space, accounting for more than half of the total

amount of net usable area completed during the period.

These buildings are BGC Corporate Center (22,600 sq

m), Bonifacio Stopover (31,400 sq m), and Uptown Place

Tower Two (27,700 sq m). Two buildings were

completed in the North EDSA Triangle area that

delivered a combined 57,700 sq m of additional office

space, raising North EDSA Triangle’s office stock by

17% QoQ. Other buildings that went online during the

period include AO United Life Building (5,100 sq m) in

Makati and Southkey Building (11,700 sq m) in Alabang.

Substantial office supply tempered

by strong demand

Overall vacancy in the Makati CBD decreased to 1.7% in

the first quarter of the year from 2% in 4Q 2015.

Premium office space vacancy was stable at 0.31% as

vacancy rise in the Philamlife Tower was offset by the

additional take-up in Enterprise Centre. Grade A

vacancy improved to 4.6% from 6.1% due to strong

leasing in Ayala Life-FGU Insurance Center and Petron

Megaplaza. Vacancy rate in Grade B buildings was

practically unchanged at 1.05%.

Other major business districts also recorded strong

occupancy during the first quarter of the year. Fort

Bonifacio’s vacancy level improved significantly to 2.6%

from 6.1% in the previous quarter due to strong leasing

in Grade A buildings such as One World Place and Net

Park. Vacancy in Grade B buildings dropped to 1.4%

from 3.8% in the previous quarter. Ortigas Center also

registered a lower vacancy rate of 1.1% from 1.5% in the

last three months of 2015.The improvement is attributed

to robust take up in both Grade A and Grade B buildings.

Makati CBD vs. Metro Manila Office Stock


Makati CBD Comparative Office Vacancy Rates (%)

GRADE 4Q 2015 1Q 2016 1Q 2017F

Premium 0.30 0.31 1.06

Grade A 6.07 4.58 5.50

Grade B & Below 1.06 1.05 1.50

All Grades 1.99 1.68 2.00


Forecast New Residential Supply (in sq m Net Usable Area)

LOCATION AS OF 2014* 2015 2016F 2017F 2018F 2019F TOTAL

Makati CBD 2,862,118 0(9,084) 005,143 019,900 040,300 012,240 02,930,618

Ortigas Center 1,298,773 081,509 059,353 015,767 047,068 174,500 01,676,969

Fort Bonifacio 0,984,802 185,701 318,967 404,097 200,797 038,066 02,132,431

Eastwood 0,300,264 - - - 028,220 - 00,328,484

Alabang 0,378,271 018,270 035,562 086,156 058,271 - 00,576,530

Mandaluyong 0,284,550 - - 114,576 - 072,900 00,472,026

North EDSA-Triangle 0,336,546 005,681 101,414 134,587 091,230 080,240 00,749,699

Pasay City Reclamation 0,186,203 071,219 081,898 025,385 064,590 072,900 00,502,195

Other locations** 0,399,886 126,867 038,030 117,720 228,907 039,245 00,950,656

TOTAL 7,031,413 480,164 640,367 918,189 759,383 490,092 10,319,608


*Revised figures **Manila, Pasay, Quezon City, and other fringe locations

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Slower office rental rate growth across major business districts

Rental rates in premium buildings in the Makati CBD

recorded a slower growth during the first quarter of

the year, at 0.79% to PHP1,280 per sq m a month,

from a 1.6% increase in the previous quarter. Rental

rates in Grade A buildings grew by 0.2% to PHP 915

per sq m while rents in Grade B buildings increased

by 0.3% to PHP719 per sq m. In Fort Bonifacio,

rental rates for Grade A buildings rose to PHP 894

per sq m, up 1.2% QoQ. Rents in Grade B buildings

grew by 1% from PHP761 per sq m to PHP768 per

sq m a month. Ortigas Center Grade A buildings

commanded a rental rate of PHP663 per sq m from

PHP660 in the previous quarter while Grade B

buildings’ rates rose by 0.3% to PHP581 from

PHP579.

Makati CBD Office Supply and Demand


Comparative Office Rental Rates (PHP / sq m / month)

Makati CBD (based on net useable area)

GRADE 4Q 2015 1Q 2016 % CHANGE (QoQ) 1Q 2017F %CHANGE (YoY)

Premium 1,120 - 1,420 1,130 - 1,430 0.79 1,190 - 1,520 5.95

Grade A 720 - 1,100 730 - 1,110 0.22 760 - 1,160 4.58

Grade B 595 - 839 597 - 840 0.34 630 - 890 5.75


Office capital value growth

outpaces rental rate increase

For the first quarter of the year, average capital

values for Premium Makati buildings reached

PHP174,779, up 4.8% QoQ. Grade A office values

rose by 5.6% to PHP135,232 from the average value

of PHP128,079 in the fourth quarter of 2015. Makati

Grade B buildings posted a growth rate of 5% to end

up with an average value of PHP84,667. Grade A

capital values in Fort Bonifacio averaged

PHP131,352, up 4.6% QoQ. On the other hand,

Grade B capital values reached PHP100,393, a

4.4% increase from the previous quarter. Ortigas

Center Grade A office space capital values

increased by 3.6% to PHP84,032 while Grade B

capital values averaged PHP68,229, a 3.7%

increase QoQ. Capital values for Premium and

Grade B Makati buildings are projected to grow

Makati CBD Office Capital Values


between 8% and 10% over the next 12 months while

those for Grade A segment are seen to rise by 1%.

Office prices in Fort Bonifacio for both Grades A and

B are seen to grow by 8.5%. Meanwhile, Ortigas

Center capital values are expected to increase by a

tenth over the next 12 months.

Comparative Office Capital Values (PHP / sq m / month)

Makati CBD (based on net useable area)

GRADE 4Q 2015 1Q 2016 % CHANGE (QoQ) 1Q 2017F %CHANGE (YoY)

Premium 154,300 - 179,100 161,400 - 188,100 4.81 175,700 - 204,700 8.83

Grade A 89,700 - 128,100 94,800 - 135,200 5.58 104,100 - 148,600 1.01

Grade B 65,600 - 95,700 68,900 - 100,400 4.98 75,800 - 110,300 9.89


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Residential Record condo completions

anticipated in 2016 In the five major districts in Metro Manila, only three

residential projects were completed during the first

three months of the year, with three projects (two in

Makati and one in Fort Bonifacio) sliding on their

completion dates. The completed projects are all

located in Fort Bonifacio – The Venice Luxury

Residences-Dominico Tower (330 units), The Venice

Luxury Residence-Carusso Tower (330 units), and

Viceroy McKinley Hill (320 units). The Dominico and

Carusso Towers are additional towers to the

Megaworld’s Venice Luxury Residences project that

was launched in the last quarter of 2014.

For the rest of the year, Colliers expects that an

additional 11,700 units will be delivered in the major

CBDs based on developer completion

announcements. Almost half of the new units will be

located in Fort Bonifacio, while about 30% will be in

Makati CBD.

Makati CBD Residential Stock


Among the projects expected to be completed for the

remainder of the year include One Eastwood Avenue

Tower 1 in Eastwood City; Arya Residences Tower

2, Avida Towers BGC 34th Street Tower 1, and

Viceroy Mckinley Hill Tower 2 in Fort Bonifacio; The

Lerato Tower 2, Alphaland Makati Place, and Eton

Tower in Makati; and The Sonata Premier

Residences and Avant Garde Residences in Ortigas.

Forecast Residential New Supply

LOCATION AS OF 2014 2015 2016F 2017F 2018F 2019F TOTAL

Makati CBD 18,337 1,000 03,660 3,450 1,072 0,598 028,117

Rockwell 04,159 - - 0,346 0,492 0,269 005,266

Fort Bonifacio 19,427 2,779 06,730 4,125 3,129 2,482 038,672

Ortigas 13,820 2,430 01,355 0,899 0,422 0,570 019,496

Eastwood 07,548 - 00,988 - 0,632 - 009,168

TOTAL 63,291 6,209 12,733 8,820 5,747 3,919 100,719


Makati CBD Comparative Residential Vacancy Rates (%)

GRADE 4Q 2015 1Q 2016 1Q 2017F

Luxury 5.95% 8.33% 8.98%

Others 9.36% 9.76% 10.51%

All Grades 8.93% 9.58% 10.84%


Makati CBD Residential Vacancy


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Makati CBD Residential Vacancy





Makati CBD condo vacancy up due

to substantial additional supply in

neighboring areas

Residential condominium vacancies in Makati CBD

rose to 9.6% as take up slowed amid no additions in

the residential stock in the previous quarter. While

no new condominiums were completed in Makati

CBD, the newer inventory being introduced in other

areas such as Fort Bonifacio and Makati Fringe has

been leading to an increase in vacancies. Premium

buildings posted the highest increase in vacancy to

8.3% from 6%. Vacancy in Grade A buildings

increased to 7.4% from 6.7% while vacancy in Grade

B segment was unchanged at 13.6%. Makati CBD’s

vacancy is projected to rise to 10.8% over the next

12 months.

Fort Bonifacio’s overall vacancy was practically

stable at 8.6% as demand kept pace with the

increase in supply. Tenants also preferred the

condominium units offered in the area as they are

relatively larger compared to the units being

delivered in other business districts. However, Fort

Bonifacio’s vacancy is expected to increase to 9.6%

by end-2016 due to the completion of significant

amount of new condominium units. Meanwhile,

vacancies in Ortigas Center improved to 8.5% from

10.4% in the previous quarter. Vacancies in Ortigas

Center are projected to hover between 8.6% and

9.1% in the next 12 months.

An increase in vacant units in both Premium and

Grade A segments pushed Rockwell’s vacancy rate

to 3.9% in the first quarter of the year from 3.4%.

Residential rental rates soften

across CBDs, except Ortigas

Stable residential supply coupled with slow

absorption resulted in a slight softening in rental

rates in Rockwell. The business district’s rental rate

for the first 3 months of 2016 dropped by 0.5% to

PHP958 per sq m from PHP963 per sq m. Slower

take up in Makati CBD amid the additional supply

also resulted in rental rate decline. As such, rates in

the business district dropped by 1.6% to 869 per sq

m. A similar trend was recorded in Fort Bonifacio as

monthly rental rate dropped by 2% to PHP873 per sq

m from PHP891 per sq m. Rents in Fort Bonifacio

posted the biggest decline during the period under

review. Meanwhile, strong take up in Ortigas Center

put upward pressure on rental rates. From January

to March of this year, condominium units in the

business district commanded PHP516 per sq m, up

2% from PHP506 in the previous quarter.

With the delivery of additional condominium units

over the next 12 months, rental rates in Fort

Bonifacio are projected to decline by 2%. Rental

rates in Makati CBD, which will corner about 30% of

the additional units this year, will decline by 3.2%.

Meanwhile, Ortigas Center rents are projected to

drop by 2.7% over the next 12 months.

Makati CBD Comparative Residential Lease Rates for Exclusive Villages (PHP / mo)

3BR - 4BR, Unfurnished to Semi-Furnished

VILLAGE LOW HIGH

Forbes Park 250,000 650,000

Dasmarinas Village 230,000 600,000

Urdaneta Village 250,000 360,000

Bel-Air Village 230,000 350,000

San Lorenzo Village 140,000 250,000

Magallanes Village 150,000 250,000

Ayala Alabang Village 130,000 280,000


Prime 3BR Units Residential Rents


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Metro Manila Residential Condominium

Comparative Luxury 3BR Rental Rates (PHP / sq m / month)

LOCATION 4Q 2015 1Q 2016 % CHANGE (QoQ) 1Q 2017F % CHANGE (YoY)

Makati CBD 600 - 1,200 590 - 1,100 -1.63 570 - 1,110 -3.22

Rockwell 814 - 1,112 810 - 1,106 -0.51 800 - 1,097 -0.84

Fort Bonifacio 690 - 1,094 670 - 1,073 -1.97 661 - 1,051 -1.99


Residential capital value growth

declines Capital values for Makati CBD residential property

grew by 0.2% to PHP151,622 per sq m from an

average of PHP151,323 in the last quarter of 2015.

Rockwell values also rose by 0.2% to a range of

between PHP122,000 and PHP203,000 per sq m.

Premium units in the business district still command

the highest average prices and values are expected

to grow by 2% over the next 12 months. Fort

Bonifacio values posted the highest growth during

the period under review, rising by 2.6% to end up

with an average price of PHP150,000 per sq m.

Colliers expects values in Makati CBD and Ortigas to

grow between 2.4% and 3% over the next 12

months.

Prime 3BR Units Residential Capital Values


Comparative Residential Lease Rates (High-Rise)

3BR, Semi-Furnished to Fully Furnished

LOCATION MINIMUM AVERAGE MAXIMUM

Apartment Ridge/Roxas Triangle

Rental Range (PHP / mo) 150,000 200,000 300,000

Average Size (sq m) 286 303 330

Salcedo Village



Legaspi Village



Rockwell



Fort Bonifacio




Metro Manila Residential Condominium

Comparative Luxury 3BR Capital Values (PHP / sq m / month)

LOCATION 4Q 2015 1Q 2016 % CHANGE (QoQ) 1Q 2017F % CHANGE (YoY)

Makati CBD 106,400 - 196,200 106,600 - 196,600 0.20 109,100 - 201,100 2.35

Rockwell 121,700 - 202,100 121,700 - 202,100 0.19 124,300 - 206,500 1.97

Fort Bonifacio 114,700 - 185,400 114,700 - 185,400 0.00 117,900 - 190,700 2.83


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Retail

New compact malls raise stock,

convenience of retail shopping

Metro Manila total retail stock reached 6.12 million

as of the first quarter of 2016, increasing by about

107,000 sq m over the past six months. Retail

projects completed during the past six months

include Circuit Lane Makati, SM Center Sagandaan,

Uptown Parade Mall, Uptown Mall, and the retail

podium of Shangri-La at the Fort. The recently-

completed projects are all classified as

neighborhood and district centers. The opening of

neighborhood and district retails projects has been

the trend since 2014, with only one new regional

(Fairview Terraces) and one super-regional (Fisher

Mall) mall completed the past 27 months. This can

be attributed to the lack of developable land, with

much of the available land now being used to build

more office and residential buildings. The

development of smaller retail establishments has

also raised the level of convenience of retail

shopping, as neighborhood and district malls

primarily cater to a specific and immediate segment

of the population. The bias towards the

development of smaller retail spaces alongside

residential projects also reflects the changing

preferences of working Filipinos that is partly

influenced by their evolving lifestyles.

More than 700,000 sq m of retail space is expected

to be added to Metro Manila’s stock by the end of

the year. Among the major projects are the

expansion of SM Mall of Asia, Festival Supermall,

and SM Bicutan. Ayala Land is further raising its

retail footprint in the Metro with the completion of

five malls that will deliver close to 160,000 sq m of

additional retail space.

Metro Manila

Comparative Retail Vacancy Rates (%)

CLASSIFICATION 3Q 2015 1Q 2016

Super-regional 0.41 0.41

Regional 1.58 1.31


Regional and super-regional malls

at near full occupancy

Super-regional malls in Metro Manila are at near full

occupancy, registering a vacancy rate of 0.41%,

unchanged from the vacancy rate posted during the

third quarter of 2015. Regional malls’ vacancy rate,

meanwhile, further decreased to 1.3% from 1.6% in the

third quarter of 2015. Regional malls’ vacancy rates

have significantly improved since the first quarter of

2015.

Occupancy will remain high over the next 12 months

given the urban population’s rising disposable incomes,

aggressive expansion of current retailers, and

continued influx of foreign retail brands.

Average rents in Ayala Center reached PHP1,505 per

sq m a month, up 1.3% from PHP1,485 per sq m

posted in the fourth quarter of 2015. Ortigas Center

rental rates averaged PHP1,353, an increase of 1.8%

from the fourth quarter of last year. Colliers is projecting

retail rents in Ayala Center and Ortigas Center to grow

by about 5% by the end of the year.

Retail Stock

Metro Manila

CLASSIFICATION 3Q 2015 1Q 2016 % CHANGE (QoQ) 1Q 2017F % CHANGE (YoY)

Super-regional 3,657,635 3,657,635 0.00% 3,961,435 8%

Regional 1,037,411 1,037,411 0.00% 1,172,942 13%

District/Neighborhood 1,317,087 1,387,776 5.37% 1,681,376 21%

All Levels 6,012,132 6,082,821 1.18% 6,815,752 12%






Makati Monthly Retail Rents


Ortigas Monthly Retail Rents


Consumer confidence at a record-

high

Consumer outlook over the next 12 months remains

positive. Consumer confidence is at a record-high, with

confidence index recorded in the first quarter of 2016

matching the all-time high posted in 2Q2013 since the

poll started in 2007. The central bank said the

respondents attribute their higher optimism to the

availability of more jobs; stable prices of commodities;

and influx of more investors in the country. The

confidence is also attributed to oil price rollback;

implementation of social protection programs such as

Pantawid Pamilyang Pilipino Program (4Ps); good

governance; improvements in infrastructure; peace and

order; and anticipated election of new government

officials.

The central bank poll noted that consumers generally

anticipate lesser household expenses as well as an

increase in household income and savings which could

translate to growth in real income and higher

purchasing power of the household.

Positive medium term outlook for

retail

Rising household incomes due to expanding

Business Process Outsourcing (BPO) and

manufacturing sectors; robust OFW remittances; a

low inflationary environment; increase in

employment opportunities; and stable political

conditions all point to a positive medium term

outlook for the Philippine retail sector.

Retail trade is expected to grow further over the

short-term given the robust consumer spending,

which represents more than 70% the country’s gross

domestic product (GDP). This is one of the largest in

the world compared to the global average of about

60%. The Economist Intelligence Unit (EIU) is

projecting retail spending in the country to grow by

about 10% per year from 2016 to 2019.

Retail spending will continue to be propelled by two

major growth drivers, OFW remittances and BPO

revenues. The central bank is projecting remittances

from Filipinos working abroad to grow by 4% to USD

29.6 billion in this year. Meanwhile, BPO revenues

are projected to reach about USD 24.5 billion this

year from a little less than USD 22 billion in 2015.

The sector’s full-time employees (FTEs) are

expected to reach 1.2 million from 1.1 million in

2015.

The two growth drivers will be complemented by low

inflation rate and increase in the number of jobs to

be created this year.

The sustained growth in retail spending has provided

the impetus for convenience store operators to

expand their reach and capture a larger fraction of

the urban population. According to the EIU’s latest

Retail Industry report the local franchisee of 7-

Eleven is planning to operate 2,000 branches by

end-2016 from about 1,340 stores as of the first

quarter of 2015. Family Mart, which opened its 100th

store in March last year, is planning to open between

600 and 700 additional branches in 3 years.

Meanwhile, Puregold has partnered with Japan’s

Lawson to open 75 convenience stores this year and

put up an additional 400 branches by 2020. The

retail sector remains an important part of the local

economy, accounting for an estimated 15% of GDP.

The current retail market is characterized by a shift

from traditional units such as sari-sari (village) stores

to more organized forms like supermarkets and

convenience stores. Sari-sari stores are expected to

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Copyright © 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

For more information:

Julius Guevara Director Research & Advisory +632 858 9050 [email protected]

Joey Roi Bondoc Research Manager Research & Advisory +632 858 9057 [email protected]

Randolf Ilawan Research Assistant Research & Advisory +632 858 9068 [email protected]

David Young Managing Director Philippines +632 888 9988 [email protected]

remain buoyant as they target a niche market (i.e.

small, local communities), but they will be facing

tighter competition from convenience stores as these

expand to more towns experiencing rapid

urbanization.

Consumer Spending Growth Rate (%)

Source: Philippine Statistics Authority

A number of areas where retailers could find

alternative growth include planned communities

where consumption-oriented young workers and

business process outsourcing (BPO) firms thrive.

The local retail sector will become more competitive

over the short-run as more foreign brands enter the

market as a result of the full implementation of the

ASEAN economic integration. This is also an

opportunity that local players could take advantage

of as they could acquire franchises or partner with

foreign brands using their familiarity of the domestic

market to their advantage. A stiffer competition

among retailers should also develop the productivity,

creativity and innovation of players, thus resulting in

further developments in brands, concepts and retail

trends. Moreover, relaxation of foreign ownership

restrictions in key economic sectors such as land

ownership and further liberalization of retail trade are

expected to sustain the local retail sector’s growth

over the medium term.

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