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MANILA OFFICE REPORT
MANILA OFFICE REPORT 4Q101
4Q10
ECONOMY2011 is perceived to be a critical year as it remains to
be determinedwhether the country will be able to sustain growth
amidst certain risks.Such risk include the negative impact of the
flood of speculative capital asinvestors run to developing
economies, prices of financial assets may alsobe affected by the
direction and strength of capital flows amidst the
globalrebalancing occurring in the world economy, and the stiffer
regulatorychanges resulting from the stricter capital rules under
Basel III which maylater on affect the profitability of banks. The
need to continue capital marketreforms is therefore emphasized. The
monetary board on the other hand
has kept borrowing and lending rates unchanged at 4% and
6%respectively. The government overshot its investment targets for
2010, withPhilippine Economic Zone Authority (PEZA) and Board of
Investments(BOI) combined registered Php503.39 Billion worth of
approvedinvestments. This growth was led by electronics and
manufacturingsectors. Inflation may have slightly increased in the
4th quarter due to theholiday spending, higher food and fuel prices
but the full-year figure stayedwithin target range. Fiscal health
remains to be a concern. In fact, foreigndebt rose to US$59.8
Billion as a result of increased borrowing and foreignexchange
revaluation. Policy makers argue that public debt is
stillmanageable since most of these loans were spread over a long
period.
OVERVIEW
2010 ended with very little changes in lease rates in most
submarkets. Infact, as expected the market remained relatively at
the bottom for theremaining part of 2010. The year ended with the
office market generallyconsidered to be largely tenant-favorable.
The wait-and-see attitude of themarket has ended shifting towards
optimism as investor sentimentimproves. The 4th quarter may also be
characterized by stably low leaserates, with high vacancy rates in
most submarkets. Makati CBDs primerates averaged at Php850psmpm,
whereas vacancy rate stood at 8.75%.
OUTLOOKImproving investor sentiment and economic indicators
tends to support thegeneral consensus that 2011 will continue to be
a better year for the office
market. The expectation of a commencement of the general
increases inlease rates is stil l holding up. The slowdown or even
lack of developersshoring up new supply in 2010 will likely result
to restrictions in supplycome 2011, putting pressure on vacancy
rates.
Absorption rates are likely to increase, particularly in non-CBD
areas suchas Fort Bonifacio and Quezon City come 2011 as demand
picks up, led byBusiness Process Outsourcing (BPOs). From being
tenant-favorable in2010, the market will shift to neutral come 2011
until 2012. TheImplementing Rules and Regulations (IRR) of the Real
Estate InvestmentTrust (REIT) Law is expected to be released come
2011, leading toincreased investments not only in the office market
but also for the RealEstate Industry as well.
ECONOMIC INDICATORS
2009 2010F 2
GDP Growth 1.13% 5-6%
CPI Growth 3.4% 3-5% 3.5
UnemploymentRate
7.5% 7.3%
Employment Rate 92.5% 92.7% 9
Source: NSCB, NSO, NEDA, CFEI
BEAT ON THE STREET
The next quarter will be crucial fCompanies looking to take on
new space anconsider relocating to more favorabpremises at current
bottomed rates. Leasrates will start moving upwards as developedo
not have additional supply for 2011.Josemari Cuervo, President
& CEO; CuervFar East in association with CushmanWakefield.
GRADE A RENTAL VS. VACANCYRATES
MARKET FORECAST
ABSORPTON: This trend of low
absorption rates as a lag effect of therecent world economic
slump, will likelycontinue for the remaining part of theyear.
CONSTRUCTION:There are a numberof notable office projects in
2009 and2010. Continuous shoring up of newsupply, however
diminished, is likely tocontinue despite fragile world economy.
RENTAL RATES: Lease rates are likelyto remain stable for 2010.
Gradualincreases may occur come 2011.
0
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1,000
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1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
PHP/sq.m./mth
Rent Vacancy
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MANILA OFFICE REPORT 3Q102
MANILA OFFICE REPORT 4Q10
*Market terms & definitions based on BOMA and NAIOP
standards.
This report contains information available to the public and has
been relied upon by Cushman & Wakef ield on the basis that it
is accurate and complete.Cushman & Wakefield accepts no
responsibility if this should prove not to be the case. No warranty
or representation, express or implied, is made to theaccuracy or
completeness of the information contained herein, and same is
submitted subject to errors, omiss ions, change of price, rental or
otherconditions, withdrawal without notice, and to any special li
sting conditions imposed by our principals.
2010 Cushman & Wakefield, Inc. All rights reserved.
Please consider your environmental responsibility before
printing this report.
FOR INDUSTRY-LEADING INTELLIGENCE TO SUPPORT YOUR REAL ESTATE
AND BUSINESS DECISIONS, GO TO CUSHMAN & WAKEFIELDS KNOWLEDGE
CENTER AT: www.cushmanwakefield.com/knowledge
Cushman & Wakefield of California601 South Figueroa Street,
47 th FloLic. # 00616335Los Angeles, California 90017(213)
955-5100
Cuervo Far East, Inc.101 Esteban St. Cor. Dela Rosa St.,Legaspi
Village, Makati City, PhilippinesTrunk Line: (632) 750-6610
Fax: (632) 750-6603
MARKET / SUBMARKET STATISTICS
OVERALL YTD YTD
VACANCY UNDERCONSTRUCTIO
NOVERALL
MA RKET/ SUBM ARKET INVENTORY(Sq.m.) RATE CONSTRUCTION(Sq.m.)
COMP LETIONS(Sq.m.) ABSORPTION(Sq.m.) Php Euro US $
Ortigas Center 1,135,000 3.2% 550 9.47 12.55
Makati CBD 2,718,097 8.75% 66,000 850 14.63 19.39
Fort Bonifacio 1,618,481 6.0% 31,600 12,000 600 10.33 13.69
Filinvest Corporate 700,000 22.0% 450 7.75 10.27
GRADE A RENTAL RATE*
MARKET HIGHLIGHTS
BUILDING SUBMARKET TENANT SQUARE METERS BLDG CLASS
Bldg. G Quezon City IBM 2,600 A
Commerce & Industry Plaza Fort Bonifacio Factset 1,600 A
Commerce & Industry Plaza Fort Bonifacio UAE Embassy 1,600
A
BUILDING SUBMARKET Buyer SQUARE METERS PURCHASE PRICE
N/ A
BUILDING SUBMARKET M AJOR TENANT SQUARE METERS COM PLETION
DATE
Jecoprime Fort Building Fort Bonifacio N/ A 12,000 4Q 10
BUILDING SUBMARKET M AJOR TENANT SQUARE METERS COM PLETION
DATE
W Office Fort Bonifacio N/ A 9,108 1Q 11
GA Corporate Center Quezon City N/ A 10,000 1Q 11
Sun Life Center Fort Bonifacio N/ A 22,500 2Q 11
Zuellig Building Makati CBD N/ A 66,000 3Q 12
SIGNIFICANT 4Q10 NEW LEASE TRANSACTIONS
SIGNIFICANT 4Q10 SALE TRANSACTIONS
SIGNIFICANT 4Q10 CONSTRUCTION COMPLETIONS
SIGNIFICANT PROJECTS UNDER CONSTRUCTION/ RENOVATION
*Php/psm/mthExchange Rate:US$ = Php43.8300EUR =
Php58.0930Source: CFEI
