Q3 Market Update

Media Round Table | November 26, 2014

real estate market overview

Developer

CAPEX 2014

Ayala Land

Php 70B

SM Prime

Php 70B

Megaworld

Php 46B

Vista Land

Php 20B

Filinvest

Php 20B

Robinsons Land

Php 16B

Very positive sentiment

Demand remains high in residential
sector but moving towards lower
segment
Local players have massive CAPEX
plans to cover current constructions and
new launches

Transaction volume by type of use, last 12 months

Main drivers:
4%

OFW remittances
IT-BPO industry

21%

Office

Domestic demand

Other

Tourism

Dev site
9%
66%

Source: KMC MAG Group Research

Hotel

real estate market overview

Mid end residential

Luxury residential

Late upswing

Early downswing

Late downswing

Positive but falling

demand,
increasing vacancy

Falling
demand, decreasi
ng vacancy

Sustained growth
in demand,
increasing
construction

Source: KMC MAG Group Research

Office
Industrial
Retail

Early upswing
Increasing
demand,
decreasing
vacancy

office market update

Attractive landlords

Rental Rate
Php/sqm/month

Makati CBD

Bonifacio Global City

Ortigas

market
1,000.0

Strong market
performance
Driven by shortage of
supply

800.0
600.0
400.0

New supply will put

pressure on rental
growth and vacancy rate

200.0
0.0

Rental growth will

continue but will be
more conservative
Source: KMC MAG Group Research

Grade A Office Market

Makati CBD

Bonifacio
Global City

Ortigas CBD

Rental rate
(PHP/sqm)

940.5

827.3

584.8

residential market update

Slight increase in average rental rates from Q2
2014
Positive demand for residential market
Focus of developers is shifting to the lower
segments from the luxury segment
Middle income market keeps demand buoyant

Average net rental

levels Q2 2014

Average net rental

levels Q3 2014

Makati CBD

764.1

768.5

Bonifacio
Global City

868.5

874.3

Ortigas CBD

689.5

695.0

Source: KMC MAG Group Research

property bubble|the central banks measures

The high activity has raised
issues of an overheated
property market

Real estate loans and interest rates, 1999-1H/2014

Commercial REL

Residential REL

Bank Average Lending Rate

Reverse Repo Rate

In Billions PHP

700.0

14.0%

600.0

12.0%

500.0

10.0%

400.0

8.0%

300.0

6.0%

200.0

4.0%

100.0

2.0%

0.0

0.0%

The Central Bank introduced

stress tests

Macro prudential measure

To ensure the banking

industrys healthy exposure
to real estate lending

Good initiative to stabilise

liquidity and restrain
speculation
This will gear up the economy
for the possible normalisation
of global interest rates

Source: KMC MAG Group Research

upcoming cbd|quezon city

What makes Quezon City the next CBD?
Largest city in Metro Manila
Location of numerous government offices
and headquarters of PNP & AFP
Home of major broadcasting networks
Major educational institutions

500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0

Extensive railroad and road network

n Grade A Office

What areas does QC need to become a fullfledged CBD?

Infrastructure interconnecting the subdistricts
Public transport options

Source: KMC MAG Group Research

Average Rental Rate

PHP 635.4/sq.m

Vacancy Rate

3.5%

upcoming cbd|bay city

What makes Bay City the next CBD?
Entertainment City
Future tourism hotspot
Multiple business parks being built:
Aseana City

450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0

Metropolitan Park (Metrobank Group)

Future City (SM)
What areas does Bay City need to become
a full-fledged CBD?
Proper support infrastructure
(roads, public transport, healthcare, etc.)

Source: KMC MAG Group Research

n Grade A Office

Average Rental Rate

PHP 589.2/sq.m

Vacancy Rate

2.04%

decongesting metro manila

Key to decongesting Metro Manila is
fixing the traffic and transport system
Poor infrastructure costs the PH P2.4B/day
All things needed to improve the situation
is ready and waiting for the go signal
The plans are there: JICA Study
The money is there: the Philippines has
the best credit ratings it has ever had
(cheaper debt)
Why is there no go signal?
Main issue is lack of political will
Source: KMC MAG Group Research, JICA, NEDA

decongesting metro manila|JICA study

Regional development plan
Set up urban areas outside the proximity of
Metro Manila (Cavite, Laguna, Bulacan, etc.)
Spatial development concept
Transport Network:
NLEX SLEX connection
High quality and capacity public transport
(commuter rail & subway)
Gateway port development
Gateway airport development (Sangley Point)
Integration of all transport and road networks

Source: KMC MAG Group Research, JICA

hotel & leisure industry

Tourism industry continues to welcome
more arrivals each year
Biggest hindrance to growth is the vital

Visitor Arrivals to the Philippines, January to August

2014

3,268,542

2013

3,180,903

2012

2,832,207

2011

2,626,134

2010

2,355,628

infrastructure that provides accessibility to

the country
NAIA renovation is purely cosmetic, the
infrastructure still lacks support for more
planes to land
There is a need for more runways or
airports in order to absorb more transit
arrivals
The Hotel & Leisure industry is all about
access
Source: KMC MAG Group Research, DOT

1,000,000

2,000,000

3,000,000

4,000,000

hotel & leisure industry

Outside of Metro Manila, developers are focusing on Cebu, Boracay, and Palawan particularly in El
Nido and San Vicente

Lio

Mactan Newtown

Boracay Newcoast

Sta. Barbara

Developed by
Ayala Land

Developed by
Megaworld

Developed by
Megaworld

Developed by
Megaworld

Located in El Nido,
Palawan

Located in Mactan,
Cebu

Located in Boracay

Located in Iloilo

Source: KMC MAG Group Research

Q3 Market Update
Media Round Table | November 26, 2014