METRO MANILA RESEARCH - Knight Frank
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
RESEARCH
METRO MANILA
MARKET UPDATE Q4 2018
METRO MANILA REAL ESTATE SECTOR REVIEW
FDI RISES AS NEIGHBORING COUNTRIES
CONTINUE TO BET ON “ASIA’S RISING TIGER”
COVER | The Philippines remains a popular investment destination for Asian investors
FIGURE 1
Net Foreign Direct Investment Level By Country of Origin (in USD Mn)
905.65 SNAPSHOTS
900
750 2017 2018 Economic Indicators
600
450 384.25
6.1%
263.97
300 189.33 183.51
150 64.4
13.25 8.56
0 GDP
SINGAPORE HONGKONG CHINA JAPAN Q4 2018
Source: Bangko Sentral ng Pilipinas
The Philippines continues to attract
6.1%
Foreign Direct Investments (FDI) as
formulates policies that will limit
the economy carries on
constraints in doing business in the
experiencing growth of above 6% country. On October 2018, the 11th Inflation Rate
for the past 7 consecutive years. Regular Foreign Investment December 2018
The growth was mainly brought Negative List was amended to
about by the increase in include five areas that will allow
government spending from the 100% foreign investment
3.1%
present administration’s “Build, participation. The list includes
Build, Build” infrastructure program. internet businesses (as excluded
from mass media), teaching at
At the end of 2017, the Philippines higher education levels provided the OFW Remittances
posted the highest rise in Foreign subject being taught is not a November 2018
Direct Investments (FDI) among professional subject (i.e., included in
a government board or bar
ASEAN countries. FDI remains
examination), training centers that
robust as investments increased by are engaged in short-term high-
42% in the first half of 2018. As of
October 2018, net foreign direct
investments reached $8.5 billion, an
level skills development that do not
form part of the formal education
system, adjustment companies,
7.02%
Avg. Bank Lending
increase of 2% from the previous lending companies, financing
December 2018
year’s $8.4 billion. The largest share companies and investment houses,
in FDI was investments on and wellness centers.
Manufacturing, which rose to $1.03 There is a large room for further
5.11%
billion from $894.8 million during the expansion of the Philippine
same period in 2017. Manufacturing economy in 2019, as strong
was followed by real estate macroeconomic fundamentals
remain sound and foreign capital
91-Day T-Bill
activities ($269.6 million), and
continue to be invested in the Q4 2018
financial and insurance activities
($230.2 million). country. The average inflation in
2019 is forecasted to revert back to
Equity capital placements 3%. The service sector will remain
the main driver of growth of the
52.77
predominantly came from
Singapore ($905.7 million), economy, backed by an excellent
pool of low cost-skilled labor.
Hongkong ($264 million) and China
Moreover, the campaign spending
($189.3 million), representing for the upcoming mid-term Avg. PhP-USD
45.3%, 13.2% and 9.5% of the total elections and the country’s hosting December 2018
FDI from January to October 2018, of the Southeast Asian games in the
respectively. latter part of the year are expected
to further advance the country’s
The Philippines continuously opens economic performance.
its doors to foreign investors and
2
RISING RENTS AND GROWING SUPPLY TO FURTHER
STRENGTHEN THE METRO MANILA OFFICE SECTOR
OFFICE | 2019 predicted to be a good year for the office market despite large upcoming stock
Metro Manila Office Sector ended Net absorption of office space was FIGURE 2
2018 on a high note with a measured at 337,277 square
Office Space Influx 2018 (in sq.m.)
maintained positive momentum and meters in the fourth quarter of
continuing growth in the fourth 2018, bringing the total 2018 net 7000000
quarter of 2018. Modernization of absorption to almost 600,000 6000000
the workplace and continuing square meters of leasable space.
5000000
trends were noted during the year. Fort Bonifacio, Bay Area, and
Ortigas exhibited an active and 4000000
NET ABSORPTION & VACANCY healthy office market in the last 3000000
RATE quarter of the year. 2000000
1000000
Metro Manila’s overall office Fort Bonifacio ended 2018 with the
vacancy rates was recorded at largest net absorption among the 0
4.88% in Q4 2018, which was Central Business Districts CBD) of
driven by the continuing strong Metro Manila. 150,899 square
demand in office space from meters of Gross Leasable Area Q1 2018 Q2 2018 Q3 2018 Q4 2018
international firms, IT-BPO (GLA) was absorbed in Fort Source: Santos Knight Frank Research
companies, and PAGCOR enabled Bonifacio in Q4 2018, as the CBD
companies. Office vacancy competes against Makati, boasting SM Prime’s Three E-Com Center
remained within healthy levels of of newer buildings with modern started its operations in Q4 2018,
below 6% since Q4 2010. The designs and architectures. with Amazon Philippines as a major
vacancy level was below 5% in Q4 tenant. The opening of Three E-
2018 despite the more than Bay Area office developments Com Center added 68,584 square
350,000 square meters of new logged a net absorption of 68,581 meters of leasable space to Bay
supply introduced within the square meters in Q4 2018. Demand Area’s total office stock.
quarter, signifying a robust office was generated from expanding IT-
BPO and PAGCOR-enabled Towers 1 and 2 of Ayala Land’s
market.
companies. Ayala North Exchange in Makati
increased the CBD’s total office
Another notable net absorption in supply by 56,000 square meters.
TABLE 1
Q4 2018 was Ortigas CBD’s 67,489
Q4 2018 Office Data square meters of GLA. Firms L & Y Plaza and Robinsons Land’s
choose to locate in Ortigas given Cyberscape Gamma in Ortigas and
Weighted Avg its fringes added 55,490 square
Vacancy the CBD’s competitive rates.
Area Lease Rates meters of office GLA to another of
Rate
(PhP/sq.m./mo.) NEW SUPPLY Metro Manila’s most sought-after
business districts.
Makati 1,419.68 4.13% Completion and turnover of new
office buildings added 373,331
Fort square meters of GLA to the
1,150.54 5.32%
Bonifacio
approximately 5.4 million square Ayala North Exchange
© Ayala Land
meters of existing Prime and Grade
Alabang 772.13 0.36%
A office space in the Metro Manila
Quezon
900.73 8.62%
major CBDs.
City
The Finance Center, Twenty-Five
Ortigas 698.72 5.85%
Seven McKinley, and High Street
South Corporate Plaza (Tower 1 &
Bay Area 842.71 1.27%
2) constitute the additional 193,257
METRO square meters of new office supply
1,042.35 4.88%
MANILA in Fort Bonifacio.
Source: Santos Knight Frank Research
3
UPCOMING SUPPLY Emerging developments in Fort Quezon City (QC) documented a
Bonifacio drove the weighted weighted average lease rate of PhP
Makati is set to witness the turnover
of 191,238 square meters of office average lease rate of the CBD to 900.73 per square meter per
GLA in 2019. Prime-grade office PhP1,150.54 per square meter per month, exceeding the PhP900-
building Nex Tower by Nova Group month, which represents a 3.50% mark in the last quarter of 2018.
is the most notable upcoming office Q-o-Q and an 11.25% Y-o-Y Rental rates in QC grew by 0.53%
building in Makati. It will increase increase. Despite the large number Q-o-Q and 9.33% Y-o-Y.
the office stock of the country’s of upcoming office buildings and Developments in Cubao, Vertis
financial capital by 31,173 square commercial developments in North, and townships along the C-5
meters. Bonifacio Global City (BGC), Corridor (Arcovia City, Ortigas East,
The planned completion of Ayala McKinley Hill, and McKinley West, Bridgetowne and Parklinks) are
Land’s Park Triangle Corporate lease rates are forecasted to grow expected to drive rental rates up to
Center and BGC Corporate Center further in 2019, given the quality of the PhP1,000-mark this 2019,
2 in 2019 will inject 38,875 square the buildings slated for delivery. following the boosted activities in
meters and 26,620 square meters nearby areas.
of GLA into Fort Bonifacio,
respectively. Moreover, Asian
Century Center of Century FIGURE 3
Properties, also in Fort Bonifacio,
should be operational by Q1 2019. Upcoming Supply (in sq.m.)
It will supply 26,000 square meters
of additional GLA to the CBD.
Furthermore, Megaworld’s World 700,000
Commerce Place is due Q2 2019, 600,000
adding another 105,000 square 500,000
meters to the Uptown Bonifacio
development. 400,000
300,000
Ortigas will be welcoming 398,499
square meters of additional office 200,000
space in 2019. The notable 100,000
upcoming developments in Ortigas 0
include SM Keppel Tower and SM Makati Taguig Ortigas Bay Area Alabang Quezon City
Mega Tower, which will revamp the
Ortigas skyline with 103,000 square 2019 2020 2021
meters and 96,000 square meters
of office space, respectively.
Source: Santos Knight Frank Research
WEIGHTED AVERAGE LEASE
RATES
Amidst new and upcoming supply, FIGURE 4
office asking rents in Metro Manila Weighted Average Lease Rate (in PhP) and Year-on-Year
continued to rise. Weighted average Growth Rate (in %)
lease rates in Metro Manila grew by
3.25% Quarter-on-Quarter (Q-o-Q)
and almost 10% Year-on-Year (Y-o- 2,000.00 14.00%
Y), increasing by 9.38% in Q4 2018. 12.00%
Weighted Average Rents remained 1,500.00 10.00%
above PhP1,000 as it was pegged
8.00%
at PhP1,042.35 per square meter 1,000.00
per month. 6.00%
500.00 4.00%
Makati continued to occupy the top
2.00%
spot in terms of asking rents.
Makati’s weighted average lease - 0.00%
rates was pegged at PhP1,419.68 Makati Fort Alabang Quezon Ortigas Bay City
per square meter per month, an CBD Bonifacio City
increase of 3.10% Q-o-Q and
10.37% Y-o-Y. Lease Rates Y-o-Y Growth
Source: Santos Knight Frank Research
4
OFFICE FOR SALE CO-WORKING TREND Local property developers
recognized the sizable co-working
The ballooning of rental rates led The biggest trend in the office market. Ayala Land and Robinsons
property developers to consider sector of late is the rise of serviced Land already ventured into co-
selling office spaces to interested and co-working spaces. Coworking working with Ayala Land’s “Clock-
parties. This will result to better is a term first used by entrepreneur In” and Robinsons Land’s
cashflows and rate of returns to the Brad Neuberg in 2005. A co- “Work.Able”. Clock-In emerged as
building owners. Occupiers, on the working office space is designed to one of the well-known local co-
other hand, opt to purchase spaces provide a dynamic, productive, and working brands. It is situated in
to save on recurring rental costs. collaborative environment that various Ayala-owned buildings such
boast of ‘breathability’ and as C2 Bonifacio High Street and
Pre-selling office developments in ‘flexibility’ and without the
Makati command the highest selling Bonifacio Technology Center in
constraints of the usual corporate BGC, Makati Stock Exchange and
price ranging from PhP160,000 per office environment. Co-working
square meter to PhP320,000 per Ayala North Exchange in Makati
usually caters to freelancers, small and The 30th Corporate Center in
square meter. Notable Grade A start-up companies, and
office developments which are Ortigas. Robinsons Land, on the
independent professionals. other hand, introduced “Work.Able”
expected to be completed by 2022
include The Gentry Corporate Plaza Regus, Spaces, WeWork and in the newly-operational
in Valero Street and The Stiles Common Ground are some of the Cyberscape Gamma in Ortigas.
Enterprise Plaza in Circuit Makati. notable world-class serviced and Co-working rates varied depending
co-working offices that are on the location. Co-working offices
Due to the strong demand for office emerging and expanding in the
space in BGC, all buildings with in Fort Bonifacio had a daily rate of
Philippines. Regus is a popular PhP620 to PhP1,000 per table per
offices for sale are 100% sold to- serviced office provider in the
date. At the farther part of Taguig, day. Co-working price range in
country. Its first Philippine venture Makati was pegged at PhP550 to
however, Ayala Land Offices was in 1999 and it eventually
launched Tryne Enterprise Plaza in PhP1,000 per table per day. The
offered co-working spaces through daily rates for Alabang and Pasay
Arca South. The 13-storey West the “Spaces” brand. Spaces has an
Tower has a Gross Saleable Area of co-working space ranged from
existing office in World Plaza in PhP400 to PhP600 per table per
19,736 square meters and sells at BGC and will be opening another
an average of PhP250,000 per day. QC and Ortigas had the
office in Makati. cheapest co-working rates among
square meter. The tower is
scheduled to be handed over to Moreover, another US-based all the CBDs in Metro Manila,
unit owners in Q4 2023. company, WeWork, started ranging from PhP250 to PhP600
operations in Uptown Bonifacio per table per day.
Ample office inventories remain Tower 3 and announced a second
available for sale in the other Metro office in RCBC Plaza in Makati.
Manila business districts. Average
selling prices in these areas range Furthermore, Malaysian co-working
from a low of PhP155,000 per brand, Common Ground, recently-
square meter to a high of opened its first branch in Arthaland
PhP260,000 per square meter. Century Pacific Tower and is
opening another office at IBP Tower
in Ortigas.
FIGURE 5
Co-Working Rate Price Range (Daily Rates)
1,200.00 1,000.00 1,000.00
1,000.00
800.00 600.00 600.00 600.00
550.00
600.00
400.00 620.00
550.00
200.00 400.00 400.00
300.00
- 250.00
Makati City Fort Bonifacio Alabang Quezon City Ortigas Bay City
Source: Santos Knight Frank Research
5
METRO MANILA RESIDENTIAL SECTOR ENDS 2018
WITH STRONG DEMAND INDICATORS
Residential | Robust buying activities from expatriates fueled the demand for residential units
The local residential market per month, a remarkable 11-unit square meter in the last quarter of
continued to display vigorous increase from Q3 2018. 2018. Taguig and Makati followed
numbers due to the unwavering with average selling prices of
purchasing activities from both Demand for middle-income projects PhP214,491 per square meter and
foreign firms and local continued to be highest in Metro PhP205,452 per square meter,
professionals. Overall monthly take- Manila, with a take-up of 37.46 respectively.
up in the fourth quarter averaged units per month at an average. 1-
27.98 units per month, coming from bedroom sales overtook studio
TABLE 2
23.1 units per month in the previous units in the quarter, making it the
more sought-after unit type. 1-
Q4 2018 Residential
quarter. The influx of foreign Condominium Sales Market
investors and workers, as a result of bedroom units sold at an average of
15.62 units per month in Q4 2018. Statistics
the growing number of PAGCOR-
enabled companies in the country, Most of the 1-bedroom units sold Avg.
remained to be one of the major were intended for employee Area
Units
Monthly
drivers of residential sale in Metro housing in the Bay Area. Sold (%)
Take-up
Manila. The Philippine Amusement SELLING PRICES AND YEAR-ON-
and Gaming Corporation (PAGCOR) YEAR GROWTH Makati 95.45% 44.24
reported a growing list of approved
licenses as of December 2018. Bulk Bay Area and Makati registered the Taguig 94.63% 12.89
residential purchases for the highest year-on-year growth in
purpose of employee housing prices among the Metro Manila Quezon City 91.61% 14.15
created an upward pressure on the CBDs in Q4 2018 at 65.7% and
prices of units. 32.7%, respectively. Bay Area’s
Ortigas* 91.22% 48.40
indicative weighted average selling
DEMAND AND ABSORPTION price remained the highest across
Metro Manila for the last 3 Alabang 96.35% 11.93
Q4 2018 overall absorption rate in
Metro Manila rose slightly at consecutive quarters. Residential
condominium prices in the Bay Area Bay Area 95.24% 49.69
94.95%, even with new project
launches during the quarter. averaged Php242,467 per METRO
93.46% 27.98
MANILA
Bay Area recorded the highest
*Includes parts of Mandaluyong, Pasig, and
average take-up rate among the San Juan
Metro Manila CBDs in Q4 2018 at
49.69 units per month. Majority of FIGURE 6
the Chinese companies are located Indicative Average Selling Prices per Area (PhP/sq.m.)
in the Bay Area and some parts of
Makati. 600,000
Ortigas closely followed Bay Area, 502,894
500,000
with a 48.4 units per month average
performance. Investors and end 399,136
users in Ortigas are primarily 400,000
considering the potential for high 290,271
returns due to the anticipated 300,000 251,294 237,532
increase in accessibility once lined- 204,130
up infrastructure projects are 200,000
completed.
172,743
100,000 137,135 125,605
Makati occupied the third spot with
an average take-up of 44.24 units 75,873 81,649 82,074
0
Makati City Taguig City Quezon City Ortigas Alabang Bay Area
Source: Santos Knight Frank Research
6
High-end condominium projects Some of the notable upcoming the construction of Arcovia City in
realized the highest year-on-year townships are concentrated along the Pasig side of C-5. The first high-
growth in prices, with selling prices the C-5 Corridor. Eton Properties end condominium project in Arcovia
growing at an average of 23% in the and Ayala Land’s Parklinks project City, 18 Avenue De Triomphe, is for
fourth quarter. High-end projects boasts of being the largest mixed- launching within 2019. The 37-
sold from Php122,554 per square use development in the area, storey residential project will offer
meter to Php399,137 per square covering 35 hectares of land. 576 residential units of different
meter in Q4 2018. cuts, targeting the young
Megaworld Corporation continues professionals working in the area.
NEWLY-LAUNCHED PROJECTS to expand its township portfolio with
Residential property developers
continue to bank on the Vion Tower
Source: Megaworld
government’s large-scale 18 Avenue De Triomphe
Source: Megaworld
infrastructure program by acquiring
land and master-planning
developments proximate to planned
infrastructure projects. Uptown Arts
Residences, Megaworld
Corporation’s newly launched
property in Taguig, is located near
the proposed Skytrain Uptown
Station and the bridge that will
connect Fort Bonifacio to Pasig. In
addition, Megaworld Corporation
recently launched Vion Tower in
Makati, which capitalizes on its
accessibility to the proposed
Magallanes Transport Hub. Makati
is likewise set for a major
transportation upgrade with the
construction of a subway system.
The new infrastructure is expected
to improve capital values and
rejuvenate interests in the city. Also
in Q4 2018, Aseana Residential
Holdings launched the first two of
the four towers of MidPark Towers.
The residential project is within
MidPark Towers
Aseana City in Parañaque City and Source: BusinessMirror
is in close proximity to the recently
launched Parañaque Integrated
Terminal Exchange.
GENTRIFICATION IN MANILA
The massive infrastructure projects
of the government and lack of
developable land within the Metro
Manila CBDs paved the way for the
gentrification of fringe areas. Major
developers expand their portfolio by
acquiring land outside the city core
and turning them into urban
township developments. Townships
are ideal for residents because it
offers an integrated community
where they can live proximate to
retail establishments and
workplaces.
7
Bridgetown Business Park by Arcovia City
Source: Megaworld
Robinsons Land Corporation will
soon introduce residential
condominiums to complement the
upcoming office buildings in the
mixed-use development. The
township will mostly cater to the
Business Process Outsourcing
(BPO) sector.
BOOM OF CO-LIVING
With the strengthening of the IT-
BPO sector in the country,
residential demand for products
specifically targeting BPO workers
and employees entices property
developers to conceptualize and Notable co-living projects include MyTown rates, on the other hand,
unveil products and projects that Ayala Land’s The Flats Amorsolo vary depending on the type of
tap into the huge unserved and SMDC’s MyTown Dormitories. accommodation. Rooms that could
demand. At present, there are 16 MyTown fit 6, 4, and 2 persons cost
Co-Living projects present an projects in various locations within PhP4,050 per bed per month,
alternative accommodation that BGC and Makati while The Flats PhP4,200 per bed per month and
meets the needs, desires and have upcoming sites in BGC Fifth PhP8,100 per bed per month,
preferences as well as addresses Avenue, BGC Parkway and Circuit respectively. A Private Queen Room
the focal concerns of BPO workers Makati.. is also available for PhP16,100 per
and staff, young urban month.
A bed in The Flats is priced
professionals, ordinary office PhP6,250 per month (excluding Another co-living project to watch
workers and students. Bed and utilities) for the first 6 months of out for is First Georgetown’s GRID,
room options for individuals and lease. The monthly occupancy cost which is also situated in Makati.
staff housing are available. increases to PhP6,700 per month
The worsening traffic situation (excluding utilities) in the
within the major business districts succeeding months.
of Metro Manila creates a demand The Flats Amorsolo
Source: Make It Makati
for housing units that are close to
places of work. This promotes
personal and monetary well-being,
saving the worker a great deal of
time and money. Also, renting a
residential condominium unit might
be too expensive for employees
living on a strict budget. Hence, the
dormitory model appears to be
more compelling and practical.
Sharing living spaces likewise
promotes social interactions and
friendly collaborations for an
enhanced overall living experience.
8
PROPERTY DEVELOPERS MOVE INTO
WAREHOUSING AND LOGISTICS
INDUSTRIAL | New opportunities in the industrial sector identified by local firms
The Gross Domestic Product (GDP) property developers to re-visit FIGURE 7
of the Philippines grew by 6.1% in opportunities in logistics and
Industry Sector Composition
the final quarter of 2018, bringing warehousing outside the city core.
(Q4 2018)
the full year GDP growth to 6.2%. Developers likewise formulate
The industry sector grew fastest at strategies that cater to the notable Electricity, Mining &
6.9%. Manufacturing and growing demand coming from Gas & Water Quarrying
construction were the largest Small and Medium Enterprises Supply
10%
3%
contributors to industry growth at (SME).
62% and 25%, respectively.
Moreover, government spending on Double Dragon Properties is set to
infrastructure increased by 6.9%, open the Central-Hub Iloilo, a
the fastest pace since 2013. warehousing hub that will add Construction
25%
22,000 square meters to the
Manufacturing
With the projected prolonged present industrial supply. 62%
elevated level of fuel prices and as
e-commerce continues to reshape In addition, Prime Orion Properties,
retail, last-mile delivery hubs, inner- in partnership with Mitsubishi Corp.,
city distribution centers, cold plans to build a new Standard
Source: Philippine Statistics Authority
storage and warehouse facilities will Factory Building (SFB) inside the
remain in high demand. 11-hectare Laguna Technopark.
The SFB will have an estimated in the country. The building will have
The average lease rate for industrial GLA of more than 60,000 square 29 storeys of modern storage, with
space were at a minimum of meters and will include only 8 units per floor. An extra
PhP152 and a maximum of PhP589 commissaries, cold storage, light space is to be provided per unit,
per square meter per month. Cities manufacturing and logistics which can be used as showroom or
of Makati, Mandaluyong and facilities. The total area will be office space. The ground floor will
Parañaque recorded the highest divided into 40 leasable units, each be dedicated to banks, for easier
lease rates at PhP589, PhP457 and having an estimated area of 1,200 trading and transactions between
PhP438 per month, respectively. to 1,500 square meters. businesses and clients.
The scarce supply of industrial The Juan Luna Logistics Center in
properties within Metro Manila, Binondo, Manila will be Anchor
nevertheless, has been forcing Land Holdings, Inc.’s third
FIGURE 8
Industrial Space Average Lease Rates (PhP/sq.m./mo)
Makati ₱589
Mandaluyong ₱457
Parañaque ₱438
Taguig ₱300
Quezon City ₱255
Pasig ₱225
Las Piñas ₱157
Valenzuela ₱152
₱0 ₱100 ₱200 ₱300 ₱400 ₱500 ₱600 ₱700 Juan Luna Logistics Center
Source: Santos Knight Frank Research Source: Anchor Land Holdings Website
9
HOSPITALITY MARKET STEADILY CRUISING THE
2018 FLIGHT PATH
HOSPITALITY | New Transportation Routes, Expansion of Airports and Hotels, Rising Tourist Arrivals and
Better Utilization of Technology all show a Brighter Future for the Capital
The Department of Tourism (DoT) FIGURE 9
celebrated a momentous occasion Philippine Foreign Tourist Arrivals 2018
as the country welcomed the
highest number of tourist arrivals in South Koreans
19%
decades . Foreign tourist arrivals in
From Other
the country increased by 7.68% to Countries
7.1 million in 2018 despite the 28%
closure of Boracay Island.
Boracay’s closure opened up Hong Kong
opportunities for alternative tourist SAR
destinations in the country, such as 1% Chinese
Cebu, Iloilo, Palawan and Siargao. Indians 15%
2%
South Korea remained the Malaysians
country’s top tourism market with 2%
about 1.6 million visitor arrivals in Singaporeans British
2%
the full year of 2018. South Korea 2%
Canadians
Americans
12%
(19%), China (15%) and US (12%) 3% Taiwanese Aussies Japanese
occupied the top 3 spots in terms 3% 3% 8%
of 2018 visitor arrivals to the
Philippines. China was recognized Source: Department of Tourism
as the most improved tourism
market, achieving an almost 30% the prospect of long-haul flights to The Ninoy Aquino International
year-on-year growth in tourist European cities while Cebu Pacific is Airport (NAIA) received 42 Million
arrivals, with 1.3 million Chinese looking at direct flight opportunities passengers in 2017, which is
nationals visiting the country in to North Asia. These new links will beyond the airport’s 30.5 million
2018. serve as the country’s silk road annual capacity. In response, a
EXPANSION OF ROUTES AND connecting the country’s more than super consortium of the country’s
AIRPORTS 7,000 islands with the rest of the top conglomerates was awarded
world, which will consequently the Original Proponent Status (OPS)
In December 2018, AirAsia stimulate trade, tourism and to rehabilitate and increase the
Philippines added a new direct flight investments across the hospitality capacity of the Philippine’s main
route from Manila to Shenzhen, sector. and most congested airport. The
months after the launching of the target commencement of
airline’s Cebu – Shenzhen flights. Complementing the expansion of rehabilitation works will be in
The primary objective was to cater various routes to and from the September 2019. Estimated
to the growing Chinese market country, the DoT, together with the completion will be in 2 to 6 years
traveling to and from China. The Department of Transportation from start date. The goal is to
new flight routes are expected to (DOTr), is prioritizing the increase NAIA’s capacity to 47
generate increased volumes of improvement of the country’s million in the next 2 years and to 65
tourism and investment activities, international airports, especially million in the succeeding 4 years.
as well as foreseen to further those catering to the market of
enhance relations between China tourist destinations. Improvement of In addition, after a seven-year
and the Philippines. at least 85 airports are in the closure, the Manila – Davao
pipeline, including New Clark shipping route was reopened,
Philippine Airlines (PAL), the International Airport, New Bohol providing another link between
country’s flag carrier, and Cebu (Panglao) International Airport and Manila and four of the country’s far-
Pacific, a low-cost airline in the Bacolod Airport. The Philippine flung cities. The route is serviced by
Philippines, are also expected to government is likewise interested in the 2Go Group, a Philippine-based
launch new domestic and developing smaller airports with the company engaged in transporting
international routes in 2019, objective of redirecting load away people and cargo with the use of
pending the delivery of new from the country’s main gateways.
airplanes. PAL is currently studying
10FIGURE 11
MM Upcoming Hotel Room Supply
2019 2020 2021-2023
1214
1010
847
713 678
591 613
275 280
200
Makati Ortigas Bay Area & QC Taguig
NAIA Terminal 1 (08-19-18) Pasay
Image Source: DZBB Super Radyo (others)
Source: Santos Knight Frank Research
FIGURE 10 enhancement of trade and Budget hotels continue to
MM Q4 2018 Hotel room Supply investments, and the expansion of mushroom in various areas in and
Distribution a logistics provider’s capability. outside of Metro Manila. Hop Inn
METRO MANILA’S HOSPITALITY Tomas Morato recently-opened in
INDUSTRY QC, bringing the number of hotel
Alabang
QC rooms in QC to 2,919 rooms.
11% 6% As the country’s center of culture,
BGC
7% economy, education and Newly-minted into the Philippine
government, Metro Manila Hospitality Industry, RedDoorz, an
welcomed the most number of online budget hotel marketplace,
visitors, both domestic and foreign, partners with low-cost hotel owners
Bay
among all other places in the to standardize product offerings,
Area &
Makati Philippines. Manila is often the
Pasay formulate marketing and sales
(others)
29% venue of choice when hosting
strategies, and handle customer
33% international conferences,
conventions and events, such as feedback. RedDoorz and other
concerts and economics summits. similar service providers, such as
The Metro Manila hospitality Zen Rooms, Nida Rooms and Oyo
Ortigas
14% industry growth remains mainly Rooms, play a huge role in the
driven by Meetings, Incentives, introduction of small and less
Source: Santos Knight Frank Research
Conferences and Exhibitions known hotels to the market.
(M.I.C.E.) and local guests on
staycation. In response to growing tourist
volume, developers have been
inter-island ferries and cargo A number of hotel openings were
investing in the hotel industry
ships. recorded in Q4 2018, including
across the Philippines. Branded
Sheraton Manila by Mariott
From Davao, the ship first stops in International at Newport City in hotels are expanding not only within
General Santos (South Cotabato) Pasay. 390 new rooms were added the capital but also in locations
then in Zamboanga, followed by to Newport City’s present supply of such as Zambales (Rosewood), La
Iloilo, before it finally docks in more than 2,600 rooms. Moreover, Union (dusitD2, a Dusit brand),
Manila, and vice-versa. This Hotel Okura is set to open in Q2 Bacolod (Citadines, an Ascott
interconnectivity between the five 2019, adding another 196 rooms. brand), Davao (Dusit) and Cebu
cities provides another avenue of Continuing and increasing demand (Dusit, Sheraton, Radisson and
transport at competitive prices, a is noted despite the presence of Citadines). Meanwhile, homegrown
boost in domestic tourism, numerous hotels in the area.
11players are also expanding their
tourism and hotel portfolio, such FIGURE 12
as Ayala with the Seda hotel brand MM 5-Star Hotels ADR Q4 2018 (in PhP)
and its new tourism estate, Sicogon
Island.
14,838.15
At present, Bay Area and other
areas in Pasay have the most
number of hotel rooms in Metro
Manila, accounting for 33% of the
total. Moreover, about 3,000 new 9,362.96
rooms will soon be available in the
Bay Area. Makati likewise 6,553.20 6,770.44 6,721.80
comprises a large portion of the
hotel supply with a 33% share in
total number of rooms. Another
1,700 hotel rooms will be added to
the Makati supply within the next
five years. A total of 6,400 rooms
are upcoming in Metro Manila until Alabang BGC Makati Ortigas Bay Area &
2023, with nearly 2,900 expected to Pasay (others)
open in 2019. Source: Santos Knight Frank Research
In terms of Average Daily Rates
(ADR), Bay Area and other areas in
Pasay have the highest ADR across FIGURE 13
the 5-Star-rated hotels in Metro MM Hotels Average Daily Rate Q4 2018 (in PhP)
Manila. ADR of 5-star hotels in the
aforementioned areas averaged
PhP15,000.00 in Q4 2018. The
price was mainly driven by 11,813.08
integrated hotels and casinos. ADR
in Makati was recorded at a little 8,847.77
over PhP9,000.00 while ADR in the
rest of the areas were estimated
between PhP6,000.00 to
PhP7,000.00. 4,681.23 4,849.14 4,785.44 4,188.99
Overall ADR follows the pattern of
that of 5-star hotels, with prices in
Bay Area and other areas in Pasay
leading all the other business
districts, pegged at almost Alabang BGC Makati Ortigas Bay Area & QC
PhP12,000.00. BGC’s overall ADR Pasay
was almost PhP9,000.00 while the (others)
overall ADR of the rest of the areas Source: Santos Knight Frank Research
ranged between PhP4,000.00 to
PhP5,000.00.
12BRICK & MORTAR ESTABLISHMENTS SUSTAIN
GROWTH AMIDST BUSTLING E-COMMERCE
RETAIL | Evolving landscape increases demand for new concepts and technologies
OPENINGS & EXPANSIONS project, targeting to finish 1 phase
per year. FIGURE 14
Both internet and traditional retail Upcoming Retail Supply Per
have thrived in the Philippines amid Upon completion, an additional Retail Category
changing dynamics of customer 250,000 square meters of retail
preferences. Despite the rapid space will be added to the mall’s
emergence and notable growth of
existing GLA. Global furniture retailer
e-commerce, Filipino consumers
continue to prefer the actual IKEA is a notable locator in the
shopping and dining experience of expansion, with slated opening in Food &
2020.
Others
visiting physical stores. Moreover, Beverage
retail expansions far and wide 36%
ascertain that retail developers Mitsukoshi Mall, Japan’s oldest 42%
expect the market to remain surviving department store chain, is
patrons and regulars of shopping making its way to the Philippines. Clothing &
malls. Complete with an authentic Apparel
Japanese food court and a 22%
Ortigas and Company is ramping
supermarket featuring wines, meats,
up the Estancia Mall in Capital
Commons, adding another 65,000 sweets, and confectioneries, Source: Santos Knight Frank Research
square meters of GLA in 2019. The Mitsukoshi Mall will surely captivate
mall expansion will include an SM the hearts of the Filipino market.
Federal Land, Inc. together with Carpet cinemas were uncovered in
department store, movie houses,
new and exciting restaurants and Nomura Real Estate Development Q4 2018.
more global lifestyle brands. The and Isetan Mitsukoshi Holdings Ltd. NEW BRANDS & TRENDS
company is keen on making Capital teamed up to bring the high-end
Commons an integrated hub for mall to the country. It will be located As of the last quarter of 2018, there
live-work-play in the Ortigas Central are 257 upcoming brands in all of the
in Federal Land’s Veritown project in
Business District.
BGC. The target completion is in major retail establishments in Metro
The Podium of SM Supermalls 2021. Manila. The Food & Beverage
recently revealed the mall’s much category takes the lead representing
awaited expansion, which is To further enhance the retail 42% of the entire upcoming brands
actually a renovated version of the experience, a number of shopping pie. Milk Tea takes up 6.5% while
original mall. The estimated malls underwent renovation. Food Buffets make up 10.3% of the
additional area is 20,000 square Robinsons Galleria in Ortigas F&B. The remaining percentage are
meters of leasable space. substantially completed renovation in restaurants, coffee shops and other
Robinsons Magnolia in QC is time for the Christmas season. As a food concepts.
likewise undergoing a considerable result of the renovation, the number
expansion. The mall expansion will of food and beverage stores 36% of the upcoming brands is
add 10,000 square meters of increased by 10% and seats in the composed of collaborative retail
leasable space to the existing mall food court rose from 1,000 to 1,200 shops, furniture, entertainment, health
GLA. seats. The renovation of the & wellness, supplies, tech, general
Robinsons Movieworld-Galleria is merchandise, sports, cosmetics, and
Ayala Land Inc. is further boosting
the Bay Area retail sector in 2019 on-going and, once completed, will services.
with the scheduled unveiling of the introduce recliner seats good for
about 100 viewers. Shops on health & wellness comprise
first phase of Ayala Malls Bay Area.
The new mall is expected to seize a 21.3% of the brands placed under the
large share of the existing SM Mall Shangri-la Mall in Ortigas enhanced Others category. This trend signifies
of Asia market. Nevertheless, SM the overall shopping mall experience that Filipinos are becoming more
Mall of Asia continues construction by renovating the 30-year old movie health conscious and are aspiring to
works on an 8-phase expansion houses. The new and improved Red live a more active lifestyle.
13The remaining 22% is made up of
clothing & apparel, eyewear,
accessories, and footwear.
Japanese brands grouped together
to create a single destination for the
selling of Japanese merchandise.
The opening of @Tokyo in various
malls made it easier and more
convenient for patrons of Japanese
items to shop for their favorite
products. Brands such as Seiko,
Legato Largo, Accessories
Blossom, Karuizawa Shirt, Prospex,
and Annello are participating Inside of @Tokyo in Uptown Mall, BGC
names. More brands are in the
pipeline. These stores share a
common payment counter, similar
to a department store, creating a Asia’s main mall. Another noticeably players recently participated, such
feel of a mall-within-a-mall. Unlike growing skincare brand is The as China’s AliPay and WeChat Pay
collaborative retail stores, @Tokyo Saem, which means spring water or that partnered with AUB Paymate
houses well-established brands, fountain in Korean. It now has 9 to cater to the growing number of
each with their own hard-walled branches in different locations Chinese nationals in the country.
booth as partition. @Tokyo has within Metro Manila.
existing branches in Uptown BGC According to PayPal’s Cross-
Mall and Market! Market!, and In December 2018, the Bench Border Consumer Research 2018,
upcoming branches in The Podium Group opened the second branch the total online spend of Filipino
and Estancia Mall. of Bench Cafe in Greenbelt, Makati. shoppers for 2017 was PhP92.5
From a simple hot dog cart in This illustrates the concept of billion. This number is expected to
Madison Square back in 2001, combining shopping and dining for rise to PhP122 billion in 2018, a
Shake Shack now has around 200 a better retail experience, which is 32% increase from 2017 statistics,
global branches serving burgers, an evidently developing trend in the and grow further to more than
milkshakes, hot dogs, frozen country. PhP185 billion in 2020. The top 3
custards, beer, and wine. This purchases were for Clothing &
American-favorite food place is Apparel at 68%, followed by
making its way to the country with Consumer Electronics at 57% and
its first-ever Philippine branch in
Cosmetics at 56%.
BGC’s Central Square.
We are yet to see an end to the Milk
Tea phenomenon as another VACANCY AND RENTS
foreign entrant, Taiwan’s popular
milk-tea shop, Tiger Sugar, arrived Retail lease rates in Metro Manila
in the country. It has opened its first averaged PhP1,342.46 per square
branch in Bonifacio High Street. meter per month in the fourth
Customers line up for hours just for quarter of 2018. Bay Area led the
the experience. What sets Tiger Metro Manila CBDs, having an
Sugar apart from its competitors is Local drug store accepting Chinese
e-wallets as form of payment at SM average lease rate of PhP1,750.00
the use of fresh cream instead of per square meter. This was driven
milk, which is a rich twist to the Mall of Asia
by SM Mall of Asia rents. Bay Area
original recipe.
likewise displayed the lowest
An increasing demand for beauty In addition, retail establishments vacancy rate with as little as 0.08%
and skin care products led to the started accepting cashless of available space as of Q4 2018.
further expansion of Korean skin transactions to offer consumers a Following Bay Area in terms of lease
care brands in the Philippines. more convenient way of paying for and vacancy rates is Fort Bonifacio,
Influenced by Korean telenovelas, purchases and elevate the buying with average rents pegged at PhP
Filipinos try to achieve a “glass-
skin” complexion (clear, luminous, experience. The country’s strongest 1,541.67 per square meter and
seemingly transparent skin). Popular player of digital wallets (also known vacancy estimated at 0.94%.
Korean skincare brand Innisfree set as e-wallet, mobile payment), Sound indicators render Bay Area
up its first branch in the country at GCash and Paymaya, are available and Fort Bonifacio as significant
the ground floor of SM Mall of in a number of major malls. Foreign growth drivers of the retail sector.
14Manila Office MANAGEMENT
10th Floor, Ayala Tower One & Exchange Plaza
Ayala Avenue, Makati City, 1226 Rick Santos
t: (632) 752-2580 / 848-7388 Chairman and CEO
+63 917 528 3687
f: (632) 752-2571 Rick.Santos@santos.knightfrank.ph
w: www.santos.knightfrank.ph
OCCUPIER SERVICES AND
COMMERCIAL AGENCY
Cebu Office Joey Radovan
Suite No. 30, Regus Business Center Vice Chairman
11th Floor, AppleOne Equicom Tower +63 920 906 7517
Joey.Radovan@santos.knightfrank.ph
Mindanao Avenue corner Biliran Road
Cebu Business Park, Cebu City 6000 INVESTMENTS AND CAPITAL MARKETS
t: (6332) 318-0070 / 236-0462
Calvin Javiniar
Senior Director
+63 917 574 3058
Calvin.Javiniar@santos.knightfrank.ph
VALUATIONS
Mabel Luna
Director
+63 917 865 3712
RESEARCH & CONSULTANCY Mabel.Luna@santos.knightfrank.ph
Jan Custodio RESIDENTIAL SERVICES
Senior Director
+63 917 574 3572 Kim Sanchez
Jan.Custodio@santos.knightfrank.ph Associate Director
+63 917 537 9650
Pai Javillonar Gelo Manansala Kim.Sanchez@santos.knightfrank.ph
Research Manager Research Analyst
Emlin.Javillonar@santos.knightfrank.ph Angelo.Manansala@Santos.knightfrank.ph PROPERTY MANAGEMENT
Rhys Revecho Ivy Ohoy Ed Macalintal
Research Analyst Research Analyst Associate Director
Rhys.Revecho@santos.knighfrank.ph Ivy.Ohoy@Santos.knightfrank.ph +63 917 533 7750
Edgardo.Macalintal@santos.knightfrank.ph
Maki Takagaki Shai Retuya
Research Analyst Research Analyst PROJECT MANAGEMENT
Anne.Takagaki@santos.knightfrank.ph Shaira.Retuya@Santos.knightfrank.ph
Allan Napoles
Managing Director
Santos Knight Frank Research provides strategic advice, consultancy services and forecasting to a +63 917 5277638
Allan.Napoles@santos.knightfrank.ph
wide range of clients worldwide including developers, investors, funding organizations, corporate
institutions and the public sector. All our clients recognize the need for expert independent advice FACILITIES MANAGEMENT
customized to their specific needs.
Dennis Nolasco
Senior Director
RECENT MARKET-LEADING RESEARCH PUBLICATIONS +63 917 5535646
dennis.nolasco@santos.knightfrank.ph
TECHNICAL SERVICES AND
ENGINEERING
Nelson Del Mundo
Vice President
+63 917 5743046
Nelson.DelMundo@santos.knightfrank.ph
Metro Manila Metro Cebu Active Capital The Wealth Report
Market Update Market Update 2018 2018
Q4 2018 1H 2018
Santos Knight Frank Research Reports are available at santos.knightfrank.ph/research
© Santos Knight Frank 2019
This report is published for general information only and not to be relied upon in any way. Although high standards
have been used in the preparation of the information, analysis, views and projections presented in this report, no
responsibility or liability whatsoever can be accepted by Santos Knight Frank for any loss or damage resultant from
any use of, reliance on or reference to the contents of this document. As a general report, this material does not
necessarily represent the view of Santos Knight Frank in relation to particular properties or projects. Reproduction
of this report in whole or in part is not allowed without prior written approval of Santos Knight Frank to the form and
content within which it appears. Santos Knight Frank is a long-term franchise partnership registered in the
Philippines with registered number A199818549. Our registered office is 10/F Ayala Tower One, Ayala Ave., Makati
City where you may look at a list of members’ names.
Cover photo courtesy of Luca Bucken on Unsplash.You can also read
