philippine real estate : real estate outlook and...

Lindsay Orr,

Chief Operating Officer

March 2013

Philippine Real Estate :

Outlook and Opportunities for

Investment Market

Real Estate

CREBA – AREAA Trade Mission

2

• Asia Pacific Market Overview

• Philippine Property Market Overview

• Growth Areas and Opportunities

• Challenges

Outline of the Presentation

Philippine

Property

Asia Pacific

Market

Growth Areas &

Opportunities Challenges

3 3

Asia Pacific Market Overview

4 4

Global Economic Challenges Continue to linger…

US • Slow economic recovery

• Fiscal woes

• Massive government debt

EU • Very weak growth

• Sovereign debt crisis

• Government defaults

China • Slowing economic growth

• Imbalanced growth

• Territorial disputes

Middle East • Slowing growth

• Political and social unrest

• Government upheaval

Japan • Natural disaster risks

• High government debt

• Territorial disputes

Philippine

Property

Asia Pacific

Market

Growth Areas &


5

Asia Pacific commercial real estate markets buffeted by

global headwinds:

5 5 5

• Asia Pacific property market weathered global challenges in 2012

• Overall commercial leasing activity slightly subdued

• Investment volumes remained stable throughout the year

• Rental rates improve in most cities while rents decline in a select few

Philippine

Property

Asia Pacific

Market

Growth Areas &


6

Direct Investment into Asia Pacific Real Estate 4Q 2012

• Transactional activity in Asia Pacific is stable, down only 3% from last year

• Asia Pacific saw net outflows of capital from inter-regional investors

$13.8 billion

$2.3 billion

Inter-regional investment volume in Asia Pacific

totalled USD95bn for 2012

$2.0 billion

Global Sources of funds

$0.5 billion

$0.4 billion

Source: Global Capital Flows 4Q12

Philippine

Property

Asia Pacific

Market

Growth Areas &


7

40

70

100

130

160

190

220

250

1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12

Net

Eff

ecti

ve R

ents

(1Q

07=1

00)

Manila Singapore Hong Kong Beijing Mumbai Bangkok Jakarta Kuala Lumpur

7

Sources: Jones Lang LaSalle (Real Estate Intelligence Service), 4Q 2012; The Office Rental Index, February 2013

Asia Pacific Rental Rates Manila vis-a-vis Key Asia Pacific markets

Note: Figures relate to the major submarket (CBD) in each city. For Singapore, figures refer to Raffles Place only. *2012 rental growth refers to the annual change from 4Q11 to 4Q12.

Manila Bangkok Jakarta Beijing

Kuala Lumpur Mumbai

Hong Kong Singapore

2012 rental growth*

Philippine

Property

Asia Pacific

Market

Growth Areas &


8

5,071

3,5713,421

2,648 2,536

2,143

1,497

895 790653 629

Hong

Kong

Beijing Tokyo Shanghai Singapore Mumbai Ho Chih

Minh

Jakarta Manila Bangkok Kuala

Lumpur

8

Asia Pacific Rentals 4Q12 Average Grade A Rent (PHP/sqm/month)

Office rents in Manila continued to

grow in 2012, at around 3.3% y-o-y.

Despite the rental growth, Manila

remains one of the cheapest in the

region.

Note: (1) Manila refers to the Makati CBD and Bonifacio Global City Grade A office market.

(2) Figures relate to the major submarket (CBD) in each city. For Singapore, figures refer to Raffles Place only.

Sources: Jones Lang LaSalle (Real Estate Intelligence Service), 4Q 2012; The Office Rental Index, February 2013

Exchange rate used (average Dec 2012): PHP 41.007: USD 1

Philippine

Property

Asia Pacific

Market

Growth Areas &


9 9 9

Supply Variations Across Region Projected % Additions to Office Stock in 2013

10.2% Shanghai

0% Sydney

5.2% Tokyo

0.9% Hong Kong

Beijing

6.9%

7.4% Seoul

10.6% Mumbai

8.7% Delhi

0% Singapore

9.3% Jakarta

0% Bangkok

18.7% Manila

33.5% Ho Chi Minh

5% Kuala Lumpur

Note: (1) Manila refers to the Makati CBD and Bonifacio Global City Grade A office market.

(2) Figures relate to the major submarket (CBD) in each city. For Singapore, figures refer to Raffles Place only.

Sources: Jones Lang LaSalle (Real Estate Intelligence Service), 4Q 2012

Philippine

Property

Asia Pacific

Market

Growth Areas &


10 10

Philippine Property Market Overview

11 11

25* emerging districts with approximately

More than 1,300 hectares of developed land

Makati CBD

1 UP Techno Hub

2 Eton Cyberpod Centris

3 Eastwood City

4 Araneta Cyberpark

5 Greenhills Redevelopment

6 Rockwell BPO Complex

7 EDSA Central

8 Robinsons Cyberpark

9 Rockwell Center

10 Century City

11 McKinley Hill

12 SM Mall of Asia Complex

13 Metropolitan Business Park

14 Newport City

15 Aseana IT Business Park

16 Asiaworld City

17 Madrigal Business Park

18 Filinvest Corporate City

19 Greenfield City

20 Eton City

21 Nuvali Canlubang

Emerging Business Districts

Bonifacio Global City

Ortigas CBD

1

2

3

16

17 18

4

5 7

6

11

8 9

13 12

14 15

10

19

20 21

Property Market Direction

22 Arca South (FTI)

23 Vertis North

24 Fairview Terraces

25 Circuit Makati

22

23

24

25

Note: *Includes those that are geographically-located outside Metro Manila.

Source: JLL Research & Consulting

Philippine

Property

Asia Pacific

Market

Growth Areas &


12

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Makati Ortigas Center Bonifacio

Global City

Alabang Quezon City McKinley Hill Eastwood

City

Bay City Mandaluyong Araneta

Center

in M

illio

ns

12 12

Current Supply = 6.4M

Future Supply = 1.6M

Office Property Market Metro Manila Current vs Pipeline Supply

Total of 8M sqm. supply

across districts (current – 2016F)

3.04 1.43 0.52 0.32 0.15 0.20 0.20 0.16 0.07 0.31

0.14

0.20

0.70

0.18 0.20 0.08 0.08

0.01 0.02

Offi

ce S

uppl

y (I

n m

illio

n sq

m)

Philippine

Property

Asia Pacific

Market

Growth Areas &


13 13 13

Total space committed as of end of 2012:

482,000 sqm

Office Property Market Metro Manila Supply Take-up and Pre-commitments

Pre-commitments signed as of end of 2012

117,000 sqm

Eastwood

5%

Makati

19%

Bay City

14%

Bonifacio

Global City

31%

Newport City

1%McKinley Hill

1%Manila

1%Araneta

Cyberpark

10%

San Juan

2%Ortigas

4%

Mandaluyong

9%

Alabang

3%

Alabang

12%Quezon City

15%

Ortigas

26%

Makati

16%

Bonifacio

Global City

31%

Note: Estimated demand for 2005-2010 was 300,000 sqm per year; and 2011 was 360,000 sqm

Office space leased as of end of 2012

365,000 sqm

Philippine

Property

Asia Pacific

Market

Growth Areas &


14 14 14

Note: (1) Figures are as of Jan 2013. (2) Existing residential units are units completed from 1999 to 2012 while future residential units are new units that will be completed from

2013 to 2018. (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

Selling Price Typical Price per sqm Unit Size

High-End Php 15 M and above Php120,000 and above Above 160 sqm

Mid-End Php1.5 M to Php15 M Php50,000 to Php110,000 Below 150 sqm

Existing (1999-2012)* Future (2013-2018E)* High-End

3,930 units

High-End

5,100 units

Mid-End

131,720 units

97%

Mid-End

143,900 units

97%

Residential Property Market Metro Manila Condominium Supply from 1999 to 2018E

3% 3%

135,650

units 149,000

units

Philippine

Property

Asia Pacific

Market

Growth Areas &


15

Ortigas/ Pasig/

Mandaluyong

18%

McKinley Hill

1%

Quezon City

23%

Manila/

Pasay

12%

Parañaque /

Muntinlupa

6%

Newport City

2%

Bay City

5%

Alabang

1%Alabang

2%

Manila/

Pasay

13%

Bay City

3%

Newport City

3%

Quezon City

19%

McKinley Hill

1%

Ortigas/ Pasig/

Mandaluyong

20%

Parañaque /

Muntinlupa

7%

15 15

Existing (1999-2012)

135,650

units

Future (2013E-2018E)

149,000

units

15

Sources: HLURB, Various brokers and developers, JLL Research & Consulting

Notes:

(1) Includes only mid-end and high-end residential condominium supply

(2) Figures are rounded off to the nearest tens

Residential Property Market Supply Share Per District – 1999 to 2018E

Makati CBD &

Fringe

18%

Makati CBD &

Fringe

20%

Bonifacio Global

City / Taguig

11%

Bonifacio Global

City / Taguig

14%

Philippine

Property

Asia Pacific

Market

Growth Areas &


16

Residential Property Market Residential condominiums outside Metro Manila

16

• Low- to high-rise residential

condominiums in regional urban

centers, such as •Metro Cebu

•Metro Davao

•Cagayan de Oro City

•Angeles City

•Baguio City

•Tagaytay City

•Iloilo City

•Condominium developers include: •Major developers

•Local developers


Philippine

Property

Asia Pacific

Market

Growth Areas &


17

Existing Retail Supply

(As of 2012)

Future Retail Supply

(2013E-2015E)

Retail Property Market Existing and Future Retail Shopping Mall Supply


Provincial

6.1 million sqm

48%

Metro Manila

6.7 million sqm

52%

Provincial

0.9 million sqm

57%

Metro Manila

0.7 million sqm

43%

Philippine

Property

Asia Pacific

Market

Growth Areas &


18

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2011 2012 2013E 2014E 2015E 2016E

Num

ber o

f Hot

el R

oom

s

Makati CBD Bonifacio Global City Manila Bay Area Newport City Quezon City Alabang Ortigas CBD Bay City / Entertainment City

18

Hotel Property Market Supply of Hotel Developments in Metro Manila (2011-2016)

Note: Total proposed hotel rooms with unconfirmed target completion dates are mostly located within Entertainment City in Parañaque City.

1,500

1,370

4,700

4,240

1,720

Total Launched and Planned Hotel

Rooms (2013 – 2016): 14,830 rooms Total Proposed Hotel Rooms

(with no target date yet): 1,250 rooms*

4,170

Philippine

Property

Asia Pacific

Market

Cebu

Property

Growth Areas &

Opportunities


19

Hotel Property Market Future Hotels in the Provinces

• New hotel brands entering the provinces

- Park Inn by Radisson

- Richmonde Hotel

- Lotte Hotel

- Courtyard by Marriott

• Boutique/ budget hotel chains expanding

- Seda Hotels

- Go Hotels

- Islands Stay Hotels

- Tune Hotels

Select Future Hotels in the Provinces


Philippine

Property

Asia Pacific

Market

Growth Areas &


20

Market Trends Weather Forecast

Robust growth Moderate growth Minimal decline Moderate decline Significant decline Minimal growth

LEGEND

Supply Demand Rent/Price

Office

Residential

Retail

Hotel

Metro Manila

20 Philippine

Property

Asia Pacific

Market

Growth Areas &


21 21

Growth Areas and Opportunities

22

1) Offshoring and outsourcing

Philippine O&O industry

In US$ bn

3.2

7.2

9.0

15.0

20.0

25.0

2006 2009 2010 Low-end 2016 Baseline 2016 Road Map 2016

CAGR:

30%

CAGR:

25%

CAGR:

9%

CAGR:

15%

CAGR:

20%

Direct

Employment 240K 440K 530K 680K 900K 1.3M

Additional

Office Demand 517K 1.3M 2.6M

Source: Business Processing Association of the Philippines

Philippine

Property

Asia Pacific

Market

Growth Areas &


23

2) Overseas Filipinos Remittances

-

5

10

15

20

25

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

OF

Rem

ittan

ces

(in U

SD

bill

ions

)

OF Remittances (2012):

USD21.4 billion

Sources: Bangko Sentral ng Pilipinas, JLL Research & Consulting

**OF remittances refer to cash remittances by Overseas Filipinos

Philippine

Property

Asia Pacific

Market

Growth Areas &


24 24

3) Transportation/Infrastructure Development Private-Public Partnership

Roads Rail Airports Ports

Cebu Trans-Axial

Highway*

LRT 1 Cavite

Extension

Mactan-Cebu

International

Airport Passenger

Terminal

Central Roro

Spine

NAIA Expressway LRT 2 Masinag

Extension

Puerto Princesa

Airport (upgrade)

Davao Sasa Port

(rehabilitation)

NLEX-SLEX

Connector Road

NAIA-Clark Express

Rail Link

New Bohol

(Panglao) Airport

New Cebu Port

CALA Expressway South Line

Modernization

NAIA Upgrade

Central Luzon

Expressway

MRT Line 3

Maintenance

Clark Airport (main

airport fro Greater

Capital Region)

Daang-Hari SLEX Link

Road

MRT Line 3 Additional

LRVs

Kalibo Airport

upgrade

Select PPP Projects

Source: JLLL Research & Consulting

Note: List of projects include ongoing PPP projects and potential projects under PPP.

* Included by the PPP in the list of projects for possible funding by the Project Development and Monitoring Facility (PDMF)

Philippine

Property

Asia Pacific

Market

Growth Areas &


25

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Tou

rist A

rriv

als

0

1,000

2,000

3,000

4,000

5,000

6,000

Tou

rism

Rec

eipt

s (in

US

D m

illio

ns)

Tourist Arrivals Tourism Receipts

Sources: Department of Tourism (DOT), UNWTO

Tourist Arrivals (2011): 3.9 million visitors

Tourist Arrivals (2012): 4.3 million visitors

4) Tourism Foreign Tourist Arrivals and Tourist Receipts

25 Philippine

Property

Asia Pacific

Market

Growth Areas &


26

5) Real Estate Investment Trust (REIT) Evolution of the Global REIT Market

Source: The Association for Real Estate Securitization and CFA Institute

USA

Netherlands

Australia

Canada

Belgium

Turkey

New Zealand

The Philippines India

China

Mexico

Thailand

Hong Kong

Bulgaria

Malaysia

Israel

Germany

UK

Italy

Japan

South Korea

Singapore

South Africa

France

Greece

Taiwan

Brazil

1960’s

1970’s 1990’s

2000’s

2009 - Present

1980’s

26 Philippine

Property

Asia Pacific

Market

Growth Areas &


27

Business Optimism Philippines to become one of the fast-growing economies

• IMF : raised 2013 economic growth forecast for the Philippines to 6.0%

• Tholons : Metro Manila and Cebu are the top 3 and top 8 global outsourcing destinations, respectively

• Moody’s Investors Service : October 2012 – Moody’s upgraded the Philippines’ credit rating to Ba1, just one notch below investment grade

• S&P : July 2012 – S&P raised the Philippines’ debt rating to BB+, the highest level since 2003

• Deutsche Bank : touted the Philippines as the strongest performing economy in Asia today. Its 6.4% growth in 1Q12 made it the best performing economy in the region next to China.

• CNBC : considers the Philippines as the top country for long term growth prospects due to the rapid population growth

• HSBC : Philippines will leapfrog 27 places to become the 16th largest economy in the world by 2050

• Goldman Sachs : the Philippines can be one of the top 10 “growth countries”, or economies that account for at least 1% of global GDP, within the decade.

• Morgan Stanley : included Philippines in the “overweight group” together with China, Russia, Brazil and South Africa in their Global Emerging Markets list. Philippines could become a “breakout nation”

• BofA : expects Philippines’ outsourcing industry to generate as much as $25 billion in revenue by 2016, providing employment opportunities to as many as 1.3 million individuals

Sources: CNBC, HSBC, MSCI, Bank of America (BofA), Goldman Sachs

27 Philippine

Property

Asia Pacific

Market

Growth Areas &


28

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

Est. No. of Employees Visitor Arrival

28

Country Risk: BPO Employees vs. Tourist Arrivals Growth in Office Demand Despite Country “Issues”

No.

of E

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Tot

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Philippine

Property

Asia Pacific

Market

Growth Areas &


29 29

Challenges

30 30 Philippine

Property

Asia Pacific

Market

Growth Areas &


Challenges:

• Can the Country sustain its strong macroeconomic fundamentals.

• Will the reforms undertaken by the Aquino government be sustainable after

2016 when the President steps down.

• Will the strengthening Peso have a negative impact on BPO’s and the

export industry generally.

• Will the level of overseas worker remittances ($ 21 Billion – last year) be

sustainable.

• Need to prevent a bubble from forming in the real estate sector. Supply must

be matched by end user demand. Speculation and price spikes should be

avoided.

31 31 31

• JLL is the leading real estate services firm in the country

- Sales and Leasing - Project and Construction Management

- Facilities & Property Management - Research, Consultancy and Valuation

• Forefront of the BPO industry - servicing 10 of the top 12 BPOs in the Philippines,

handled more than 50 contact center clients, and acquired over 130 sites for these clients.

• Serviced around 50% of all office space occupied by the outsourcing industry

• Negotiated about 110,000 sqm of build-to-suit buildings, and about 90% of BPO office

lease transactions outside Metro Manila.

• Handled over 350,000 sqm of office space in 2012 (renewal, expansions and new

leases).

• Transacted approximately 92% of office space in Bonifacio Global City.

• Managed 14 buildings and around 400,000 sqm in facilities management

• Sold over Php25B worth of properties in 2012.

Jones Lang LaSalle Who We Are, What We Do

32 32

© Jones Lang LaSalle. All rights reserved. 2013

This presentation has been produced solely as a general guide and does not constitute advice. Jones Lang LaSalle (JLL) has used and relied upon information from sources generally regarded

authoritative and reputable, but the information obtained from these sources may not have been independently verified by JLL. Whilst the material contained in the presentation has been

prepared in good faith and with due care, no representation is made for the accuracy of the whole or any part of the presentation. No liability for negligence or otherwise is assumed by JLL for any

loss or damage suffered by any party resulting from their use of this presentation. The whole or any part of this presentation must not be reproduced or copied without the JLL’s written consent.

Thank you

Lindsay Orr

Chief Operating Officer +63 2 902 0870

[email protected]

philippine real estate : real estate outlook and...

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