RESEARCH

METRO MANILA REAL ESTATE SECTOR REVIEW

METRO MANILAMARKET UPDATE Q3 2018

PHILIPPINE COMPETITIVENESS AND

GNI PER CAPITA ON A CONSTANT RISE

Global economists predict that thePhilippines will be able to attain aGDP growth rate that is above 6%in 2019. Economists of both theFirst Metro Investment Corporation(FMIC) and the University of Asiaand the Pacific (UA&P) remainoptimistic of an economic reboundin the second half of 2018, due tothe rising national governmentdisbursements and capital outlayfor infrastructure projects, higherpeso equivalent of remittances, andincreasing volume of exports.

Several local companies wish totake advantage of the Philippine’scompetitive market and risingincome per capita by expandingtheir respective businesses. One ofthe country’s biggestconglomerates, San MiguelCorporation (SMC), is prepping for agroup-wide expansion program thatwill cost around PhP742 billion.Ginebra San Miguel, one of theSMC subsidiaries, reported plans ofbuilding 4 new plants in variouslocations across the country andlaunching new products, adding toits existing wide array ofmanufactured beverages.

Continued on page 11. . .

2

COVER | Local firms benefitting from the country’s economic growth and planned infrastructure programs

SNAPSHOTSEconomic Indicators

GDP Q3 2018

6.1%

6.7%Inflation RateSeptember 2018

2.5%OFW RemittancesAugust 2018

6.15%Avg. Bank LendingSeptember 2018

3.35%91-Day T-BillSeptember 2018

53.94Avg. PhP-USDSeptember 2018

Figure 1Philippine GDP Growth Rate Forecasts for 2018

Rising to the 5th spot amongASEAN (Association of SoutheastAsian Nations) countries, thePhilippines once again proved itselfas a rising economic powerhouseon the world stage. The WorldEconomic Forum recently publishedthe World Competitiveness Report2018 using a new metric called theNew Global Competitiveness Index4.0. Additional categories werecreated and used in ranking the140 economies. New drivers ofproductivity and long-term growthduring the era of the FourthIndustrial Revolution were added. Inthe report, the Philippines’strongest suits were its Market Size,Labor Market, Financial System,Business Dynamism andMacroeconomic Stability.

The Philippines is envisioned tobecome an upper middle-incomecountry by the end of 2019. Thecountry’s current Gross NationalIncome per capita is just below$3,900, which is slightly lower thanthe World Bank’s $3,956 to$12,235 metric for upper middle-income countries. The Philippinesneeds to grow 4.4% next year inorder to make it to the uppermiddle-income bracket. Thepresent Gross Domestic Product(GDP) growth levels of the countryrender the goal of moving up highlyattainable.

6.5 6.8 6.7 6.76.3 6.4 6.5 6.7

Fitch Solutions Asian DevelopmentBank

InternationalMonetary Fund

World Bank

Original Forecast Revised Forecast Developing Asia

5.1

MANILA OFFICE SECTOR SUSTAINS MARKET OPTIMISM

3

OFFICE | Tighter vacancies and higher lease rates noted despite introduction of additional supply

The Metro Manila office marketsustained momentum in the thirdquarter of 2018. The overallvacancy rate continued to declinedespite additional office stock fromnewly completed developments,indicating robust demand for officespace. Q3 2018 vacancy dipped to3.96%, coming from 4.51% in theprevious quarter. Moreover, netabsorption picked up remarkably at154,855 square meters, the highestfigure yet recorded for the year. Thevalue more than offsets the 133,000square meters of leasable areaadded to Metro Manila’s total officesupply, upon completion of 6 newoffice buildings.

Various construction activities andproject launches further fortify theoffice market of Metro Manila.About 1.3 million square meters ofoffice space is expected to beavailable by the end of 2018.Majority of these spaces are alreadypre-leased and the remainingvacant stock will cater to the

growing firms and new entrantsfrom the PAGCOR-enabledcompanies.

Rental rates in Metro Manilacontinued to escalate albeit at amore gradual pace. Overallweighted average asking lease rategrew 0.81% quarter-on-quarter and9.72% year-on-year. Headline rentfor the third quarter was noted atPhP1,018.32 per square meter permonth. The continuous growth inrates supports the positive marketoutlook on the office sector.

Makati’s weighted average leaserate remains the highest headlinerent among Metro Manila’s CentralBusiness Districts (CBD). The rentsin Makati was pegged at anaverage of PhP1,377.03 per squaremeter per month, slightly higherthan last quarter’s PhP1,362.05 persquare meter per month. With anadditional Gross Leasable Area(GLA) of 10,407 square meters fromnewly operational M1, Makati officesupply expanded to about 930,000square meters. By the end of 2018,another 286,317 square meters ofoffice space is expected to add tothe existing office stock in the area.

In Fort Bonifacio, the newly turnedover One Bonifacio High Streetadded 28,992 square meters ofGLA to the area’s total supply,increasing Fort Bonifacio’s vacancyrate to 3.34% from 3.24% lastquarter. In terms of weightedaverage lease rate, Fort Bonifaciocame in second to Makati, withoffice rents pegged at PhP1,111.59per square meter per month.

Quezon City further expanded itssupply of office spaces with the

TABLE 1Q3 2018 OFFICE DATA

AreaWeighted Avg Lease Rates

(PhP/sq.m./mo.)

Vacancy Rate

Makati 1,377.03 3.42%

Fort Bonifacio

1,111.59 3.34%

Alabang 782.16 2.52%

Quezon City

895.99 8.09%

Ortigas 682.67 4.09%

Bay Area 765.94 1.42%

METRO MANILA

1,018.32 3.96%

FIGURE 2Upcoming Supply (in sq.m.)

Source: Santos Knight Frank Research

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Makati FortBonifacio

Alabang QuezonCity

Ortigas Bay City

Q4 2018 2019 2020 2021

Source: Santos Knight Frank Research

Four E-com Center

4

Recent Philippine Economic ZoneAuthority (PEZA) data show an8.82% percent growth in thenumber of investment pledges fromIT-BPO companies. The BPOindustry continues to expand itsservices to include animation, dataanalytics, legal research andanalysis, game development andaccounting, among other things.Artificial Intelligence (AI) is seen asan opportunity to move the industryup the value chain and present newroles to the Filipino workforce.Despite the looming threat ofautomation and AI, the IT-BPOsector is still expected to flourish inthe next three to five years asevidenced by the growing numberof office leasing transactions.

completion of two prime officebuildings in the third quarter: ZetaTower (35,000 square meters inGLA) and Skysuites CorporateTower (8,273 square meters inGLA). Upcoming office buildingCentris Cyberpod Five (42,336sq.m. in GLA), targeting expandingBPO companies and multinationalcompanies in the area, is expectedto commence operations before theend of the year.

In the Bay Area, Nexgen Tower andAseana 3 went online in Q3 2018,adding a total of 50,329 squaremeters or 8.7% to the total stock inthe business district. Weightedaverage asking lease rates forQuezon City and Bay Area went upin the third quarter of the year toPhP895.99 per square meter permonth and PhP782.16 per squaremeter per month, respectively.

The largest change in vacancy ratewas recorded in Ortigas, comingdown to 4.09% from 6.41% lastquarter. Alabang also exhibitedtighter vacancies at an average of2.52% of the total office stock. Nonew office buildings were turnedover in the aforementioned markets.However, a total of 192,467 squaremeters and 76,332 square metersof GLA are expected to add to theOrtigas and Alabang office supply,respectively.

The Philippines remains anattractive investment destination forBPO companies amidstuncertainties caused by thecountry’s tax reform program.Information Technology andBusiness Process Association ofthe Philippines (IBPAP) reportedthat existing investors continuouslyexpand and new entrants arelikewise expected to come in. ThePhilippines continues to capitalizeon its young, highly educated andEnglish-speaking labor force, aswell as infrastructure developmentsthat will spur investment andbusiness activities in the country.

FIGURE 3Weighted Average Lease Rate (in PhP) and Year-on-Year Growth Rate (in %)

024681012141618

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

1,600.00

Makati FortBonifacio

Alabang Quezon City Ortigas Bay City

Lease Rate (Php) Growth Rate

Source: Santos Knight Frank Research

Uptown Place Towers

MANILA RESIDENTIAL DEMAND DRIVEN BY INFRASTRUCTURE PROGRAMS AND CREATION OF MIXED-USE DEVELOPMENTSRESIDENTIAL | Infrastructure projects key to the identification of project sites and investment opportunities

5

Real estate developers continue tocapitalize on the presentgovernment’s Build! Build! Build!program by acquiring land andmaster-planning projects relative tothe reported location of the plannedinfrastructure projects. Developerslikewise highlight the completion ofthe infrastructure projects as animportant and effective sellingstrategy.

Access to Ayala Land’s Arca Southwill greatly improve following thecompletion of the on-going 7.7-kilometer C5 Southlink Project,which connects Taguig to the NAIAterminal 3. The Metro ManilaExpressway Project, also known as,“C6”, is another project thatincreases the attractiveness of ArcaSouth projects: Avida Vireo, AvidaTowers One Union Place, AlveoArbor Lanes, and Alveo ParkCascades. The Taguig IntegratedTerminal Exchange tops the list ofinfrastructure projects that isexpected to add value to ArcaSouth. It is considered as a landportterminal for people going in and outof Metro Manila.

Ortigas & Company’s developmentsinside Capitol Commons (TheMaven, The Imperium, TheRoyalton, and The Connor) aredescribed to be within walkingdistance from a future Mega ManilaSubway station while SMDC’sTrees Residences and Avida’sAvida Astrea projects in Fairview(Quezon City) boast of proximity tothe MRT Line 7 station.

Planned infrastructure projectspaved the way to the developmentof various business district fringeareas. The scarcity of developableland within the CBDs forcesdevelopers to look for propertiesoutside the city core and developthem into independent mixed-usedevelopments.

The infrastructure projects supportthese developments by bringingdown the travel time from theCentral Business Districts (CBD) tothe fringe areas. Several residentialprojects are located outside theCBDs, such as The Vantage byRockwell Primaries, Empire East’sKasara Urban Resort Residencesand DMCI’s Kai Garden Residencesand Prima Residences.

TAKE-UP & ABSORPTION

Residential condominiums in theMetro Manila CBDs continue toenjoy high take-up rates. Makatiand Alabang registered significantincreases in take-up from thesecond quarter to the third quarterof 2018. Average residential take-up in Makati was pegged at 33.3units per month in the third quarter,which is a significant increase fromthe 22.8 units per month take-upnoted in the previous quarter. Thetake-up of residential projects inAlabang almost doubled in Q32018, with an average take-up rateof 16.4 units per month comparedto the 9.9 units per month in Q22018.

Studio Units continue to be themost marketable type ofcondominium unit, with averagemonthly take-up increasing to 14.09units in the third quarter from 11.04units in the second quarter. Buyersof Studio Units are mostly investorstargeting lessees working within theCBDs and PAGCOR-enabledcompanies with the intention ofusing the units for employeehousing.

As of the third quarter of 2018,about 95% of the floatedcondominium inventories in MetroManila has been sold. Makati andTaguig (including Bonifacio GlobalCity) both exhibited high absorptionlevels. Century City and CircuitMakati are notable performers inMakati.

The emerging Arca South in Taguigis generating considerable interestsfrom investor. Most of theresidential projects in Arca Southare 97 to 100% sold as of the thirdquarter of 2018. The newestproject, Park Cascades 2 (launchedApril 2018), is approximately 75%sold. Taguig’s average absorptionrate is 97.96% to-date.

SELLING PRICE

Prices of residential units in MetroManila continue to escalate, drivenby the high demand created byfuture infrastructure projects andconvenience of living in a walkableurban development. The risingnumber of PAGCOR-enabledenterprises likewise continues toinfluence the movement ofresidential prices.

Bay Area recorded the highestyear-on-year growth in selling price(per square meter) among the

TABLE 2Q3 2018 Residential Condominium Sales Market Statistics

AreaUnits

Sold (%)

Avg.

Monthly

Take-up

Makati City 97.71% 33.30

Taguig City 97.96% 11.70

Quezon City 91.50% 21.20

Ortigas* 93.86% 24.40

Alabang 95.88% 16.40

Bay Area 94.91% 40.20

METRO

MANILA94.75% 23.21

6

Avida Towers: Makati Southpoint isanother notable project of AvidaLand. The project is located alongChino Roces Avenue in Makati Cityand targets the Makati workforce.

Completing all of Megaworld’sresidential projects in Uptown BGCis the Uptown Arts Residences.Uptown Arts Residences is a 45-storey high-end condominiumproject set to be completed by theyear 2024.

Metro Manila CBDs. Bay Area inPasay displayed a 64% year-on-year growth rate. The averageselling price in Bay Area, Pasay ispresently pegged at PhP 240,606per square meter.

Main financial districts andPhilippine headquarters, Makati andTaguig both experienced 20% year-on-year growth in condominiumselling prices as of the third quarterof 2018. The average selling price ofa residential condominium in Taguigis PhP 214,491 per square meterwhile the average selling price inMakati is PhP 205,452 per squaremeter.

Current selling prices of middle-income developments in MetroManila average PhP 147,975 persquare meter, an 11% increasefrom the previous quarter’s PhP133,100 per square meter and a20% increase from last year’s PhP122,355 per square meter.

UPCOMING DEVELOPMENTS

In the third quarter of 2018, fournew condominium developmentswere launched (under the pre-selling stage), which added another4,336 units to the overall inventoryof residential projects in MetroManila.

Shang Properties and Avida Landrecently introduced ShangResidences at Wack-Wack andAvida Towers: Verge inMandaluyong City. ShangResidences at Wack-Wack is a 50-storey resort-type high-enddevelopment of Shang Propertieslocated at the vicinity of Wack-Wack Golf and Country Club.

Avida Towers: Verge, on the otherhand, is a 34-storey middle-incomecondominium project alongReliance St. that caters to youngprofessionals working in nearbyCBDs. The two projects arescheduled to be turned over by2023.

FIGURE 4Indicative Average Selling Prices per Area (PhP/sq.m.)

95,663125,605

75,873 81,650 93,442

156,353

415,650

502,894

175,266198,861 210,082

290,271

0

100,000

200,000

300,000

400,000

500,000

600,000

Makati City Taguig City Quezon City Ortigas Alabang Bay Area

Shang Residences at Wack-WackSource: Shang Properties, Inc.

Avida Towers: Verge Tower 1Source: Avida Land

Uptown Arts ResidencesSource: Megaworld

SUSTAINED INDUSTRIAL GROWTH OPENS NEW DOORSINDUSTRIAL | Local Companies taking on the underserved logistics market

Data from the Philippine StatisticsAuthority show that the contributionof the Industry sector to thePhilippine’s Gross DomesticProduct (GDP) has been steadilyrising in the past 5 years. Q2 2018’sindustry growth was recorded at6.3%, with largest contributionscoming from Construction andManufacturing, growing at rates of13.5% and 5.6%, respectively.Manufacturing was boosted by thefurther strengthening of the retailmarket while Construction wassupported by the booming propertysector and various governmentinfrastructure projects.

Expansions in the Logistics Industry

Driven by the continuous expansionof the Philippine Economy, thelogistics industry is expected tocapitalize on the country’seconomic momentum. The industryis envisioned to grow despitechallenges due to the country’sarchipelagic landscape, worseningtraffic situation and rising fuel costs.

According to a study made by KenResearch, the Philippine’s Logisticsand Warehouse market isforecasted to reach over PhP970billion by the year 2023, led by theautomotive, electronic products,apparel & accessories, chemicalsand pharmaceuticals sectors.Moreover, the Department of Tradeand Industry (DTI) crafted a NationalLogistics Master Plan, with the mainobjective of advancing thePhilippine’s global competitivenessthrough the creation of an efficienttransport and logistics system.

Realizing an opportunity in thelogistics industry, Ayala Corporationacquired Zalora’s last mile deliverysystem, seeking to convert it to afull-service courier and freight-forwarding firm. Ayala will beallotting PhP700 million to expandthe operations of its new acquisition

SM Investments Corporationdebuted in 2017 with theacquisition of a 34.5% stake in theNegros Navigation Company, Inc.,the parent company of thecountry’s largest logistics provider,2GO Group, Inc. SM is presentlynegotiating with another locallogistics provider, Airspeed, for theacquisition of a 35% stake in thecompany.

Metro Pacific Investments Corp.(MPIC) has likewise acquired a 12%stake in Air21. Together with itswholly owned subsidiary, MetropacMovers, Inc., MPIC currently hasequity on two companies that areengage in logistics.

In addition, the InternationalContainer Terminal Services Inc.(ICTSI) has increased its stake inManila North Harbor Port Inc. to50%. The move is expected tosignificantly lower costs andinefficiencies in the transport ofgoods.

Logistics firms and retailers enterjoint venture agreements for fasterand wider distribution of productsand services. Grab Philippinesrecently requested Bangko Sentralng Pilipinas approval to launch acashless payment system forgroceries and food delivery. Grabalso partnered with Shopee, anonline shopping platform inSoutheast Asia and Taiwan, offeringsame-day delivery services ofShopee products anywhere inMetro Manila.

Notable New Entrants and Acquisitions

Most industrial properties(warehouse, standard factorybuildings and land) for lease withinMetro Manila are located in thenorthern district commonly knownas the CAMANAVA (Caloocan,Malabon, Navotas, Valenzuela). Anumber are likewise situated in thefringes of the Makati and OrtigasCentral Business Districts. Lease

rates of warehouses typically rangefrom PhP150 to more than PhP500per square meter per month.Newer, well-maintained and better-situated properties command thehigher prices as supply dwindlesand demand intensifies. Scarcity ofdevelopable land for industrial usewithin Metro Manila continue topush developers to nearbyprovinces.

Double Dragon Properties Corp.(DD) is a notable new entrant withthe opening of its first industrialwarehouse in Tarlac. DD has plansof constructing seven more of thesame template throughout thecountry, bringing its overallindustrial portfolio to 1.2 millionsquare meters of leasable spacesby 2020.

Metro Pacific Investments Corp.through its logistics arm, MetropacMovers Inc., recently bought a 20-hectare land in Cavite from PropertyCompany of Friends, Inc. (Pro-Friends). 141,000 square meters ofthe acquired portion will bedeveloped into a coveredwarehouse for consumer goods,consumer durables, automotive ande-commerce products. This will addto the company’s existingaggregate warehouse space of207,000 square meters scatteredthroughout the country.

7

FIGURE 5Industry Sector Composition (Q2, 2018)

Mining & Quarrying

4%

Manufacturing66%

Construction21%

Electricity, Gas and Water Supply

9%

8

could then be used for otherpurposes.

The Staycation trend is furtherbooming with 60 million localsvisiting different parts of the countryeach year. Majority of them are fromurban areas, aspiring for a breakfrom their hectic work lives,spending quality time with familyand bonding time with friends.Affordable hotel rates andcompetitive room packages arefactors enabling an increasingnumber of individuals to check-in tohotels just for a staycation. In anattempt to attract the growingstaycation market, hotels arelikewise improving hotel amenitiesand attractions, adding to thenumber of activities that could bedone without leaving the hotelpremises.

PhP7,600 per night for a DeluxeRoom and PhP17,000 per night fora Suite. These Integrated Resortsand Casinos merge hotels, casinos,retail outlets and performancetheaters together in order to offerguests a whole new level ofexperience in what is known as theLas Vegas of the Philippines.

Unlike hotels in the EntertainmentCity, hotels in the major businessdistricts cater to a totally differentmarket. Budget hotels aremushrooming to serve the frequentbusiness-related travelers. Theaverage daily rates of budget hotelspull down the overall hotel rates inthe various cities.

Standard Rooms in Makati hotelshave an average daily rate ofPhP2,800 per night. In Quezon City,a Standard Room costs PhP2,100per night at an average. In Ortigas,the average daily rate of StandardRooms is PhP2,000 per night.Moreover, the average costs ofSuites are PhP11,000, PhP9,500,and PhP7,700, in Makati, QuezonCity and Ortigas, respectively.

Standard Rooms in Alabang costPhP200 less than a Deluxe Room,which is priced at PhP4,400 pernight. In BGC, the cheapest room isa Deluxe Room which is priced atPhP9,000 per night. A Hotel Suite inBGC is about PhP3,400 moreexpensive per night than a DeluxeRoom.

Due to the high demand for hotelrooms, local developers areaggressively competing for a largershare in the hospitality market.Leading property developers aretaking part of the hospitalitylimelight. Seda Hotel, the hospitalitybrand of Ayala Land Inc.,announced four new branchesunderway: two in Makati, one in

January to September 2018 foreigntourist arrivals recorded animpressive 8.32% increase, incomparison to the same period oflast year. Visitor arrivals reached awhopping 5.36 million visitors year-to-date as of the end of the thirdquarter of the year. Demandremained driven by arrivals fromSouth Korea, China and USA, withChina displaying the fastest growthat a rate of 34.9%, way ahead ofthe two other countries. USA hadan increase of 7.94% while SouthKorea decreased by 1.19%.

The Philippines constantly improvesits reputation as a MICE (meetings,incentives, conferences andexhibitions) destination, accordingto the Department of Tourism (DOT)Secretary Wanda Tulfo-Teo.Businessmen accounted for 8% ofthe total tourist arrivals,corresponding to a 3% year-on-year increase. When it comes toconferences, foreign companiesconsider holding them in thePhilippines because of the country’scompetitive hotel rates and high-quality deliverables (rooms,amenities and other features) thatare at par with internationalstandards.

The influx of businessmen created ademand for co-working spacesinside hotels. Exercising the trend isSavoy Hotel by local propertydeveloper, Megaworld, whichopened last June 2018 at NewportCity. Savoy’s designated co-working space is called TheSquares, which is situated invarious hotel floors. Several poweroutlets and a high-speed internetare accessible in The Squares.Having co-working spaces close tothe place of accommodation fosterscollaboration. Moreover, the allottedbudget for renting out an officespace during the businessmen’sstay in the country,

ACCOMMODATION INVENTORIES SURGE AS TOURIST ARRIVALS INCREASEHOSPITALITY | Luxury and budget hotels go hand-in-hand in catering to market demand

The Squares at Savoy Hotel

Newport City has the mostexpensive daily rate, averagingPhP5,700 per night for a StandardRoom, PhP15,900 per night for aDeluxe Room and PhP28,800 pernight for a Suite. Hotels in theEntertainment City (Bay Area) areclosely priced at PhP5,200 per nightfor a Standard Room,

Source: When in Manila

9

Taguig and one in Bay Area.Rockwell Land is anotherdeveloper that has entered thehospitality field, with homegrownbrand, Aruga, that has a branch inMakati and two upcomingbranches: a boutique hotel inMakati and an outside-of-Manilaforerunner in Mactan.

The Metro Manila hospitalitysector is to experience furtherexpansion with the continuinghotel construction boom. MetroManila is expecting a total of7,473 additional hotel rooms inthe remainder of the year until2023. 24 hotels are in the MetroManila hotel supply pipeline,representing both new entrantsand planned expansions. Majorityof the rooms will be launched inMegaworld’s Newport City andWestside City, where 6 newhotels are scheduled to beunveiled in the next 5 years. HotelOkura Manila, Okura in WestsideCity, Sheraton Manila, HiltonManila, Grand Westside Hotel,and Kingsford Hotel will have acombined total of 2,703 newrooms. Part of New Port City’sdevelopment plan is therebranding of Maxims Hotel intoRitz Carlton.

8,700

5,900

5,200

4,000

17,000

11,700

18,700

14,000

10,300

10,200

28,800

16,600

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

BAY AREA

MAKATI

ORTIGAS

ALABANG

NEWPORT CITY

BGC

Suite Deluxe

FIGURE 7Average Daily Rate for 5-Star Hotels

In the next 5 years, Makati will bewelcoming 1,713 new hotel roomsfrom Ayala North Exchange, SedaCircuit Makati, Mandarin Oriental,Aruga Boutique Hotel, SomersetSalcedo Village, Somerset Valero,and Citadines Benavidez. NovotelSuites, Westin Hotel, and CitadinesGreenhills will make 893 roomsavailable within the vicinity of theOrtigas CBD. 1,284 rooms will belaunched in Taguig, coming fromSeda Arca South, Dusit D2 The Fortand Red Planet The Fort in BGC.Quezon City will boast of 200additional rooms by CitadinesRoces and Hop Inn Tomas Morato.Adding to the Bay Area hotel supplyare Seda Bay Area and Red PlanetEntertainment City, with acombined total of 680 rooms.

Source: Travel Book

Remington Hotel rebranded as Holiday Inn Express opened last July with newly

refurnished rooms.

0

1,000

2,000

3,000

4,000

5,000

6,000

Standard Deluxe Suite Family

FIGURE 6Average Daily Rate for 5-Star Hotels

Crimson Alabang

INCREASING DEVELOPMENT ACTIVITIES AND INNOVATIVE TRENDS BOOST MANILA’S RETAIL SECTORRETAIL | Developers mull over consumer volume and preferences in transforming the retail experience

10

OPENINGS & EXPANSIONS

New mall openings and expansionsdepict a robust retail market in Q32018. The main objective remainsunchanged, which is to cater to thegrowing consumer demand whileproviding a better retail experienceto each mall guest.

Ayala Malls Circuit was opened tothe public on July 27, 2018. It issituated within Ayala’s mixed-usedevelopment in Circuit Makati(formerly Sta. Ana Race Track) andadjacent to the existing CircuitLane. The shopping mall occupies57,000 square meters of GrossLeasable Area (GLA). Retail brandsin Ayala Malls Circuit include Anello,Banapple, Bench, Mang Inasal,Mesa, Macao Imperial Tea, Nike,Penshoppe, Regatta and Sbarro.

Duty Free Philippines Corp.launched the Luxe, a 3,000 squaremeter duty free retail outlet thataims to cater to balikbayans,tourists and travelers. The Luxe islocated at the SM Mall of Asiacomplex in Pasay City. It is one ofDuty Free’s world class outletstores in the Philippines,showcasing prestigious internationalbrands such as Coach, Chanel,Michael Khors, Dior, Lancôme,Bobbi Brown and Jo Malone. It alsohouses local brands such asGoLokal and other Pinoy delicaciesand pasalubongs.

Aside from shopping mallexpansions, distinguished brandscontinue to grow their presence inthe country. Uniqlo Manila wasrecently unveiled in Glorietta 5(Makati City). The store covers4,100 square meters of retail spaceand is labelled as “The LargestFlagship Store in the

Philippines”. It features the biggest UT(Graphic Tee) collection in the countryand boasts of a gaming space, whereguests could play Jump Force (thelatest BANDAI NAMCO Entertainmentgame), in line with their new JUMP XUniqlo UT collection.

As of the third quarter of 2018, thereare 232 upcoming brands in leadingretail establishments in Metro Manila.26% of such is composed of clothingand apparel, accessories such aseyewear and timepieces, and footwear.Another 35% is made up of foodbusinesses such as restaurants, coffeeshops and tea shops. The remaining39% consists of cosmetics, healthclinics, gym, technology stores, conceptstores, and school and office supply.

TRENDS

The in-store café concept made its wayto Metro Manila. Compared to full-serviced coffee shops, these cafes areless expensive in terms of operation andconstruction. In-store cafes aid in thebranding and overall marketing of retailstores as they capitalize on givingcustomers a unique shoppingexperience, which differentiates themfrom their competitors. Moreover, ithelps brick and mortar operators tocontinually grow in a digital market. In-store cafes in Metro Manila include CraftCentral in Ayala Malls Vertis North(Quezon City), Biblio in Ayala MallsCircuit (Makati) and Dark SpecialtyCoffee in SM North EDSA (QuezonCity).

Craft Central is a specialty store that sell art materials such as brushes, inks, paints, stickers and other DIY kits.

Luxe Duty FreeSource: SM Mall of Asia Official Facebook Page

Uniqlo ManilaSource: Spot.ph

FIGURE 8UPCOMING RETAIL SUPPLY PER RETAIL CATEGORY

Food35%

Clothing & Apparel

26%

Others39%

Source: Santos Knight Frank Research

Source: Spot.ph

11

Bark Central located at Eastwood Mall is the first indoor off-leash dog park in Metro

Manila. Bark Central offers other services such as grooming, doggie party and a café where customers and their pets can dine.

Bark Yard located in UP Town Center is an outdoor off-leash dog park where customers can play, train, and exercise with their pets.

Source: SM Official Web Page

In addition, Artificial Intelligence (AI)is penetrating the retail sector asSM Prime Holdings announced apartnership with Cal-CompTechnology Philippines and theTaiwan-based technologycompany, New Kinpo Group, inlaunching what is regarded as the“First Ever In-Mall Smart CustomerService Robot”. The robot willserve as a go-to guide that willprovide mall directions, deals,promos, and other new happeningsto watch out for at SM. The newestinteractive mall attendant will debutat SM Megamall in the 1st quarterof 2019.

VACANCY AND RENTS

In the third quarter of 2018, MetroManila’s overall average lease ratewas pegged at PhP1,341.61 persquare meter per month whileoverall vacancy rate was estimatedat 1.36%. Alabang posted thehighest vacancy rate at 2.20% whileFort Bonifacio’s vacancy rate was0.57%, lowest amongst all MetroManila CBDs.

Makati’s retail rents range fromPhP900 to PhP1,850 per squaremeter per month. Rents in Taguigmalls fall within PhP1,200 toPhP1,800 per square meter permonth. In Ortigas, mall rentsaverage PhP800 to PhP2,000 persquare meter per month.

Biblio in Ayala Malls Circuit is a specialty bookstore and café that sells a variety of imported pre-owned books and novelty

merchandises like posters and art materials.

Dark specialty coffee in SM North EDSA is linked to Onesimus (a formal wear shop

where one can purchases suits and barongs).

Retail establishments are likewisebecoming pet-friendly in order tosuit the lifestyles of the pet-owningmall-goers. Notable malls such asAyala Malls Circuit, Ayala Malls The30th, Bonifacio High Street,Eastwood Mall, Estancia, EviaLifestyle Center, Greenbelt,Powerplant, SM Aura Premier, ThePodium, Trinoma, UP Town Center,Uptown Mall, Venice Grand CanalMall and Vertis North give petsaccess to the shopping mallpremises provided that the ownersapply for a pet ID and follow sethouse rules. Century City Mall inMakati City specifically has anelevator allotted for customers whoare mall hopping with pets.

Source: Circuit Makati Web Page

Source: SM North EDSA Official Facebook Page

Source: When In Manila

Source: When In Manila

Continued from Page 2 Cover

SMC is likewise expanding itspoultry and piggery facilities, settingup a new glass packaging plant tobe operational by the first quarter of2019. Mindanao CorrugatedFibreboard, Inc., another SMCsubsidiary, is presently increasingits capacity with expansions toother areas in Visayas andMindanao for other packagingmaterials such as glass and plastic.

The present infrastructure boom inthe country, which is in line with theadministration’s Build Build Buildprogram, has resulted to anincreased demand for constructionmaterials, such as steel. In 2017alone, the Philippines was reportedto have imported steel worth $4billion. To address the huge supplybacklog, SteelAsia ManufacturingCorp. will be investing over PhP100billion for its expansion plans, whichis targeted to be completed withinthe next five years.

Santos Knight Frank Research provides strategic advice, consultancy services and forecasting to awide range of clients worldwide including developers, investors, funding organizations, corporateinstitutions and the public sector. All our clients recognize the need for expert independent advicecustomized to their specific needs.

© Santos Knight Frank 2018This report is published for general information only and not to be relied upon in any way. Although high standardshave been used in the preparation of the information, analysis, views and projections presented in this report, noresponsibility or liability whatsoever can be accepted by Santos Knight Frank for any loss or damage resultant fromany use of, reliance on or reference to the contents of this document. As a general report, this material does notnecessarily represent the view of Santos Knight Frank in relation to particular properties or projects. Reproductionof this report in whole or in part is not allowed without prior written approval of Santos Knight Frank to the form andcontent within which it appears. Santos Knight Frank is a long-term franchise partnership registered in thePhilippines with registered number A199818549. Our registered office is 10/F Ayala Tower One, Ayala Ave., MakatiCity where you may look at a list of members’ names.

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Santos Knight Frank Research Reports are available at santos.knightfrank.ph/research

Manila Office10th Floor, Ayala Tower One & Exchange PlazaAyala Avenue, Makati City, 1226t: (632) 752-2580 / 848-7388f: (632) 752-2571w: www.santos.knightfrank.ph

Cebu OfficeSuite No. 30, Regus Business Center11th Floor, AppleOne Equicom TowerMindanao Avenue corner Biliran RoadCebu Business Park, Cebu City 6000t: (6332) 318-0070 / 236-0462

MANAGEMENT

Rick SantosChairman and CEO+63 917 528 3687Rick.Santos@santos.knightfrank.ph

OCCUPIER SERVICES AND COMMERCIAL AGENCY

Joey RadovanVice Chairman+63 920 906 7517Joey.Radovan@santos.knightfrank.ph

INVESTMENTS AND CAPITAL MARKETS

Calvin JaviniarSenior Director+63 917 574 3058Calvin.Javiniar@santos.knightfrank.ph

VALUATIONS

Mabel LunaDirector+63 917 865 3712Mabel.Luna@santos.knightfrank.ph

RESIDENTIAL SERVICES

Kim SanchezAssociate Director+63 917 537 9650Kim.Sanchez@santos.knightfrank.ph

PROPERTY MANAGEMENT

Ed Macalintal Associate Director+63 917 533 7750Edgardo.Macalintal@santos.knightfrank.ph

PROJECT MANAGEMENT

Allan NapolesManaging Director+63 917 5277638Allan.Napoles@santos.knightfrank.ph

RESEARCH & CONSULTANCY

Jan CustodioSenior Director+63 917 574 3572Jan.Custodio@santos.knightfrank.ph

Pai JavillonarResearch ManagerEmlin.Javillonar@santos.knightfrank.ph

Rhys RevechoResearch AnalystRhys.Revecho@santos.knighfrank.ph

Maki TakagakiResearch AnalystAnne.Takagaki@santos.knightfrank.ph

Gelo ManansalaResearch AnalystAngelo.Manansala@Santos.knightfrank.ph

Ivy OhoyResearch AnalystIvy.Ohoy@Santos.knightfrank.ph

Shai RetuyaResearch AnalystShaira.Retuya@Santos.knightfrank.ph

Metro Manila Market Update Q2 2018

Metro Cebu Market Update 1H 2018

The Wealth Report 2018

Global CitiesThe Report 2018