Post on 30-Apr-2020
Copyright © 2015 Colliers International.
The information contained herein has been
obtained from sources deemed reliable.
While every reasonable effort has been
made to ensure its accuracy, we cannot
guarantee it. No responsibility is assumed
For more information:
Market Contact Name
Title | Market
+1 00 000 0000
Name.Name@colliers.com
Market Contact Name
Title | Market
+1 00 000 0000
Name.Name@colliers.com
Contributors:
Market Contact Name
Title | Market
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Market Contact Name
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Market Contact Name
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Offshore gaming
redefines the
office market Dinbo Macaranas Senior Research Manager
Demand for office space in Metro Manila remained
strong in Q4 2016, reaching 154,000 sq m (1.66
million sq ft), pushing 2016 take-up to a total of
676,000 sq m (7.28 million sq ft), 7% above 2015.
Demand was still driven by Information Technology
and Business Process Management (IT-BPM)
companies but was augmented by offshore gaming
firms, particularly in Q4 2016. Colliers believes that
both tenants and developers must brace themselves
for an increase in rents across submarkets as the
surge of offshore gaming firms redefines the market.
We suggest that tenants should be quick to close
transactions to ensure that they acquire their chosen
workspace. Developers on the other hand, must be
timely in delivering buildings to address the tenants'
immediate office needs.
Makati CBD vs. Metro Manila Office Stock
Source: Colliers International Philippines Research
Forecast at a glance
Demand We expect demand to grow by 8% in the next twelve months, reflecting higher level IT-BPM services growth and the surge of offshore gaming firms.
Supply
Barring further significant construction delays, we expect additional supply in the next twelve months to reach over 880,000 sq m (9.47 million sq ft).
Vacancy rate
Vacancies are likely to remain low despite new office completions with strong pre-leasing seen across submarkets. We expect overall Metro Manila vacancy to hover between 4.0% and 4.5% in the next twelve months.
Rent
Alternative locations likely to see faster rents as offshore gaming deals are closed with minimal negotiations. We predict CBD rents will grow by 5 to 6%, while alternative locations grow on average by 8 to 10% over the next twelve months.
Forecast New Supply, Major CBDs (GLA, in sq m)
Year Makati CBD Fort Bonifacio Ortigas Center
As of 2015 3,205,128 1,561,949 1,273,918
2016 8,062 16,114 270,839
2017F 28,405 66,414 401,910
2018F 77,623 43,344 210,813
2019F 51,534 13,675 245,223
2020F 193,841 341,815 32,927
Total 3,564,593 2,043,312 2,435,629
Source: Colliers International Philippines Research
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Total Stock YoY Change (RHS)
Colliers Quarterly
PHILIPPINES | OFFICE Q4 2016 9 February 2017
2 Colliers Quarterly | 9 February 2017 | PHILIPPINES | OFFICE | Colliers International
Forecast New Office Supply (GLA, in sq m)
LOCATION AS OF 2016 2017 2018 2019 2020 TOTAL
Alabang 483,148 55,315 59,189 64,753 38,900 701,305
Fort Bonifacio 1,544,757 401,910 210,813 245,223 32,927 2,435,629
C-5 Corridor 57,779 34,713 97,399 94,392 284,283
Makati CBD 3,213,190 28,405 77,623 51,534 193,841 3,564,593
Makati Fringe 221,332 25,328 61,029 - 120,754 428,443
Mandaluyong 305,970 60,440 87,577 - - 453,987
Ortigas Center 1,578,063 66,414 43,344 13,675 341,815 2,043,312
Pasay Bay Area 330,608 99,883 162,337 136,373 116,400 845,601
Quezon City* 795,886 65,553 93,557 172,842 43,364 1,171,203
Others** 353,917 50,549 75,076 92,409 64,859 636,809
Total 8,884,650 888,509 967,945 871,200 952,860 12,565,165
*Includes Araneta Center, Eastwood City, and North EDSA Triangle **Manila and other fringe locations Source: Colliers International Philippines Research
Offshore gaming take-up redefines the Metro Manila market in Q4 2016
Demand for office space remained robust in Q4,2016
reaching 154,000 sq m (1.66 million sq ft), pushing 2016
take-up to a total of 676,000 sq m (7.28 million sq ft), 7%
higher than 2015. Supply, on the other hand, saw
numerous delays as completions totalled a mere
543,000 sq m (5.84 million sq ft) – significantly lower
than the forecast earlier in the year of 880,000 sq m
(9.47 million sq ft), primarily due to the lack of skilled
laborers. Excluding the effects of construction delays in
Q4 2016, full year demand would have grown by 15%
versus 2015.
Makati CBD Office Supply and Demand
Source: Colliers International Philippines Research
The market was still primarily driven by IT-BPM
companies. Close to 60% of take-up across Metro
Manila came from IT-BPM companies. Non-BPO
companies comprised 32%, while the balance came
from off-shore gaming companies. A total of 85,000 sq m
(915,000 sq ft) of office space was taken up by offshore
gaming companies in 2016, most of which came in the
last quarter. This was a significant jump from a handful
of deals recorded noted in the previous two years. In Q4
2016 alone, over 70,000 sq m (753,000 sq ft) was taken
by offshore gaming companies, inclusive of pre-
commitments. Interestingly, the minimum volume take-
up of these companies stands at 10,000 sq m.
Take-up from non-BPO companies also continued in the
market, primarily in the central business districts of
Makati and Fort Bonifacio. Finance firms Metrobank,
Home Credit, and Citibank, among others, also
contributed significantly to the 2016 transactions. These
are among the firms that moved to newer, more modern
office spaces. Recently, more companies have
consolidated in newer buildings and looked for flight-to-
quality opportunities as their leases in older buildings
expire.
Offshore gaming, IT-BPM and tenants’ flight-to-quality to drive market in the medium term
The three major drivers: (1) influx of offshore gaming
companies, (2) continuous expansion of IT-BPM; and (3)
tenants looking for flight-to-quality opportunities, drove
the market in 2016. For 2017, Colliers foresees the same
drivers dictating the pace in the market, with overall
Metro Manila demand projected to grow by 8%.
As noted earlier, offshore gaming companies drove Q4
2016 market demand. While many are looking at the
Pasay-Bay Area as the preferred location given its
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3 Colliers Quarterly | 9 February 2017 | PHILIPPINES | OFFICE | Colliers International
Makati CBD Comparative Office Capital Values (PHP / sq m)
GRADE Q3 2016 Q4 2016 % CHANGE (QoQ) Q4 2017F %CHANGE (YoY)
Premium 169,700 - 197,700 171,100 - 199,300 0.83% 182,700 - 212,900 6.81%
Grade A 101,000 - 144,200 102,000 - 145,600 1.00% 107,600 - 153,600 5.46%
Grade B 73,000 - 106,400 73,700 - 107,400 0.93% 76,900 - 112,000 4.34%
Source: Colliers International Philippines Research
Makati CBD Comparative Office Rental Rates (PHP / sq m / month)
GRADE Q3 2016 Q4 2016 % CHANGE (QoQ) Q4 2017F %CHANGE (YoY)
Premium 1,100 - 1,500 1,200 - 1,500 1.06% 1,200 - 1,600 7.44%
Grade A 740 - 1,100 750 - 1,100 0.76% 780 - 1,200 4.63%
Grade B 610 - 860 613 - 864 0.48% 650 - 920 6.69%
Source: Colliers International Philippines Research
proximity to the airport and the planned PAGCOR
entertainment city, similar tenants have looked to other
locations in the absence of available office space.
PAGCOR reportedly has already issued 35 Philippine
Offshore Gaming Operator (POGO) licenses with 25
more planned in the next few months. This translates to
at least 350,000 sq m (376,700 sq ft) of office space in
the near term. The significant size requirement and
these companies’ willingness to pay higher rents will
potentially push rents even higher, keeping vacancies
down and forcing other traditional office and contact
center-tenants to look to other locations such as Quezon
City, Alabang, and possibly provincial sites. Thus,
Colliers expects this emerging industry to dictate the
market in 2017.
IT-BPM companies have continued to expand in Metro
Manila. More recently, they have also considered
provincial locations as players already have sites in the
country’s capital. Nonetheless, the concentration of
labor has kept Metro Manila as the preferred site. The
sizeable take-up in 2016 from Google, Towers Watson,
Cardinal Health, among others, shows that the industry
will likely continue growing. The biggest recorded
transaction for the year came from Google which closed
over 50,000 sq m (538,000 sq ft) across three sites. The
presence of these companies affirms the trend
forecasted by the IT and Business Process Association
of the Philippines (IBPAP) of a shift to mid-to-high level
value of services from primarily voice-driven services
previously.
2016 also saw tenants show a growing preference for
more modern and quality office space. The growth of
tech companies mirrors this with the expansion of
Google and Uber. Furthermore, the entry of home and
office furniture and accessories provider IKEA through
the growing flexible workspace market will potentially
dictate the workplace design preferences of Metro
Manila’s millennial-majority workforce in the coming
years.
Faster rental growth in alternative locations likely amid low vacancy and strong demand
Demand is likely to remain strong. Colliers projects an
8% growth in 2017. This should keep overall vacancy,
which stands at just over 3% today, low over the next
twelve months. We predict that the current stock will
increase by 889,000 sq m (9.57 million sq ft), 64% higher
than last year’s new adds. Despite this expected
upcoming supply, we project vacancies to remain below
5% due to the strong pre-leasing across submarkets.
Buildings due to be completed within the year are
already 32% pre-leased as of the start of 2017.
Given current market dynamics, we expect rents to
increase across the various submarkets. Alternative
locations, particularly Pasay-Bay Area, Quezon City and
Alabang, will more likely grow at a faster pace because
they are coming from a lower base. These locations are
primarily preferred by third party outsourcers not only
due to price, but also to the availability of bigger floor
plates and office spaces. Colliers recommends these
tenants to be quick to lock in deals as offshore gaming
companies are scrambling for sizeable office space and
securing them immediately with minimal negotiations.
4 Colliers Quarterly | 9 February 2017 | PHILIPPINES | OFFICE | Colliers International
Makati CBD Comparative Office Vacancy Rates
GRADE Q2 2016 Q3 2016 Q3 2017F
Premium 0.84% 0.84% 0.31%
Grade A 1.57% 1.57% 0.31%
Grade B & Below 0.62% 0.62% 0.81%
All Grades 0.92% 0.85% 0.64%
Source: Colliers International Philippines Research
Developers, on the other hand, must ensure the
completion of their planned buildings and avoid delays
similar to those seen over the last two years. Doing so
will provide tenants with more options and allow
developers to take advantage of strong pre-leasing
demand.
Colliers believes that both tenants and developers must
brace themselves for a probable increase in rents across
the various submarkets. The recent influx of offshore
gaming companies looking for office space will dictate
the market in 2017. In response, other tenants must be
quick in selecting their office space and closing
transactions. Developers must be timely in delivering
their buildings to take advantage of the current offshore
gaming demand, which may face a growth cap as the
government establishes more clearly defined regulating
rules.
Makati CBD Office Capital Values
Source: Colliers International Philippines Research
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For more information: Contributors:
Randwil Dinbo Macaranas Senior Research Manager +632 858 9047 randwil.macaranas@colliers.com
Joey Roi Bondoc Research Manager +632 858 9057 joey.bondoc@colliers.com
David A. Young Managing Director Randolf Ilawan
Research Assistant
Richard Raymundo Deputy Managing Director
Copyright © 2016 Colliers International.
The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are
encouraged to consult their professional advisors prior to
acting on any of the material contained in this report.
Copyright © 2015 Colliers International.
The information contained herein has been
obtained from sources deemed reliable.
While every reasonable effort has been
made to ensure its accuracy, we cannot
guarantee it. No responsibility is assumed
For more information:
Market Contact Name
Title | Market
+1 00 000 0000
Name.Name@colliers.com
Market Contact Name
Title | Market
+1 00 000 0000
Name.Name@colliers.com
Contributors:
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Pre-selling take-
up rebounds; rise
of fringes pushes
rents downward Dinbo Macaranas Senior Research Manager
Pre-selling take-up rebounded in 2016 after four
consecutive years of decline. Take-up has been
strong across unit sizes as previous years' launches
are also sold. Colliers attributed this to the favorable
interest rate environment which still encourages
buyers to acquire condominium units. However,
take-up in Metro Manila's secondary residential
market remains soft amid the influx of new
completions across submarkets. Developments in
fringe locations have become a viable alternative to
the expensive projects in established business
districts, leading to rising vacancies in Makati CBD,
Fort Bonifacio, and Ortigas Center. Given the falling
occupancy rates, Colliers recommends that
developers establish their own leasing arms to
assist owners in leasing out their units to a targeted
clientele and attain the promised yields. This
initiative should complement the developers' well-
established pre-selling teams.
Makati CBD Residential Stock
Source: Colliers International Philippines Research
Forecast at a glance
Demand Colliers sees both pre-selling and leasing take up in the CBDs slowing down in the next twelve months due to the completion of more projects in the fringes.
Supply
Barring further delays, Colliers sees an additional 22,800 units being completed in the next twelve months.
Vacancy rate
Colliers expects vacancies across submarkets rising due to the substantial amount of projected new supply. Vacancies in major business districts are projected to increase between 12% and 16% over the next twelve months.
Rent
Colliers projects rents in major CBDs declining between 2% and 6% over the next twelve months due to slow absorption and delivery of new units in the fringes.
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PHILIPPINES | RESIDENTIAL Q4 2016 9 February 2017
2 Colliers Quarterly | 9 February 2017 | PHILIPPINES | RESIDENTIAL | Colliers International
Forecast Residential New Supply
LOCATION AS OF 2016 2017F 2018F 2019F 2020F TOTAL
Alabang* 3,785 905 824 - - 5,514
Araneta Center* 4,240 305 - - - 4,545
Eastwood City 7,548 988 - 632 - 9,168
Fort Bonifacio 24,275 8,566 3,858 3,022 - 39,721
Makati CBD 21,663 4,784 1,072 598 334 28,451
Ortigas Center 16,250 1,489 782 570 614 19,705
Pasay Bay Area* 8,864 5,507 8,531 2,614 2,175 27,691
Rockwell Center 4,159 346 492 269 - 5,266
Total 90,784 22,890 15,559 7,705 3,123 140,061
*Emerging Source: Colliers International Philippines Research
Pre-selling rebounds in 2016 as secondary market absorption remains soft
Pre-selling take-up rebounded in 2016 after four
consecutive years of decline. Total take up for the year
reached 38,800 units. Pre-selling take-up rebounded in
2016 after four consecutive years of decline. Take-up
has been strong across unit sizes as previous years’
launches are also sold. Colliers attributes this to the
favorable interest rate environment which still
encourages buyers to acquire condominiums.
However, take-up in Metro Manila’s residential
secondary market remains soft amid the influx of new
supply across submarkets. Total take-up in 2016
reached merely 2,000 units, 70% lower than the prior
year and 66% lower than 2012 when take-up reached an
all-time high. Developments in fringe locations have
become a viable alternative to the expensive projects in
the CBDs. Fringe area completions in 2016 reached
4,800 units, higher than CBD’s 3,900 units. Occupants
are drawn to condominium units in emerging locations
given the 10% discount in rents versus their CBD
counterparts.
Key completions in 2016 include Eton Tower (786 units)
in the Makati CBD and Park West (713 units) in Fort
Bonifacio. Among the projects completed in the fringes
of Makati, Taguig, and Mandaluyong include the
Verawood Residences Aqua and Canary, The Milano
Residences, and First Homes Tower 2.
Overall vacancy continues to rise
As of the end of 2016, overall vacancy in Metro Manila
stood at 10%. This shows a 2.2-percentage point
increase from the vacancy recorded in the first half of
2016.
Colliers sees overall vacancy hovering between 12%
and 16% in the next twelve months with the delivery of
an additional 22,800 units this year.
Makati CBD Comparative Residential Vacancy Rates
GRADE Q3 2016 Q4 2016 Q4 2017F
Luxury 12.96% 13.98% 16.04%
Others 11.25% 13.23% 16.66%
All Grades 11.48% 13.33% 16.59%
Source: Colliers International Philippines Research
Colliers sees vacancies in Makati CBD rising to around
16% over the next twelve months due to the completion
of additional units within the business district and the
delivery of new units in its fringes and other major CBDs
such as Fort Bonifacio.
We see vacancies in Fort Bonifacio increasing to around
14% in the next twelve months with the delivery of an
estimated 7,500 units. Fort Bonifacio will cover about
half of the projected new supply in 2017.
Ortigas Center will account for only 9% of the total
number of units expected to be delivered in the next
twelve months. Hence, we do not see a significant rise in
vacancies. Colliers sees Ortigas Center vacancies
hovering between 7% and 9% in the next twelve months.
3 Colliers Quarterly | 9 February 2017 | PHILIPPINES | RESIDENTIAL | Colliers International
Metro Manila Residential Condominium
Comparative Luxury 3BR Rental Rates (PHP / sq m / month)
LOCATION Q3 2016 Q4 2016 % CHANGE (QoQ) Q4 2017F %CHANGE (YoY)
Fort Bonifacio 650 - 1,040 640 - 1,026 -1.50% 600 - 960 -6.37%
Makati CBD 570 - 1,120 560 - 1,100 -1.35% 530 - 1,040 -5.67%
Rockwell 790 - 1,080 780 - 1,070 -1.30% 740 - 1,010 -5.19%
Source: Colliers International Philippines Research
Makati CBD Residential Vacancy
Source: Colliers International Philippines Research
Rents in CBDs continue to decline as demand in fringes increase
Premium 3BR-Unit Residential Rents
Source: Colliers International Philippines Research
Rental rates for premium three-bedroom units in Makati
CBD declined by 1.4% to PHP837 (USD17.1) per sq m a
month from PHP847 (USD17.3) per sq m in the previous
quarter. The rental rate drop was faster than the 1.3%
decline recorded in Q3 2016. With the completion of new
units, we expect rental rates in the Makati CBD to drop
by around 5% to 7% over the next 12 months.
Rental rates in Fort Bonifacio slid by 1.5% to PHP833
(USD17) per sq m a month from PHP848 (USD17.3) per
sq m. Colliers sees rents in the business district
declining by 5% to 7% over the next twelve months.
Rockwell rents declined by 1.3% to PHP930 (USD19)
per sq m a month. We project that rental rates will slide
by 3% to 5% over the next twelve months.
Renters are drawn to developments in the fringe areas
as these offer a 10% to 15% discount. The units in the
fringes serve as halfway houses for millennials and other
professionals who opt to live near their place of work
during weekdays but go home to their families during
weekends. These weekday halfway houses are also
more practical for employees working in CBDs as the
worsening traffic in Metro Manila only makes their
commute to and from work more unbearable.
Examples of alternative condominiums in the fringes
include Cityland Makati Executive Towers, Jazz
Residences, The Beacon Makati, and The Linear Makati
in Makati Fringe; Acacia Estates in Taguig City; and Flair
Towers and Gateway Regency in Ortigas Fringe.
Capital values rise in Q4 2016; trend likely to continue
Capital values for Makati CBD residential properties rose
by 2.3% to PHP180,300 (USD3,700) per sq m from
PHP176,200 (USD3,600) per sq m in Q3 2016. Fort
Bonifacio prices increased by 2.2% to PHP163,200
(USD3,300) per sq m per month. Prices in Rockwell also
increased to PHP197,400 (USD4,000) per sq m per
month by 1.1% compared to average prices in the
previous quarter.
Given the high sales volume in the pre-selling market,
Colliers sees condominium prices rising further over the
next twelve months. This results in lower residential
yields for projects across major CBDs. We see Makati
CBD prices increasing by about 14% in the next twelve
months while Fort Bonifacio and Rockwell prices will
grow by about 8% to 10%.
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4 Colliers Quarterly | 9 February 2017 | PHILIPPINES | RESIDENTIAL | Colliers International
Metro Manila Residential Condominium
Comparative Luxury 3BR Capital Values (PHP / sq m)
LOCATION Q3 2016 Q4 2016 % CHANGE (QoQ) Q4 2017F %CHANGE (YoY)
Fort Bonifacio 97,200 - 222,200 110,500 - 226,400 2.22% 111,100 - 309,000 10.00%
Makati CBD 84,000 - 268,300 109,000 - 274,600 2.33% 116,600 - 302,000 14.73%
Rockwell 170,800 - 206,300 188,400 - 207,700 1.09% 198,300 - 230,000 8.47%
Source: Colliers International Philippines Research
Premium 3BR-Unit Residential Capital Value
Source: Colliers International Philippines Research
Project differentiation amid falling occupancy
Given the declining occupancies in the secondary
residential market, Colliers encourages developers to
differentiate their projects and cater to a particular
clientele.
Colliers believes that there is opportunity for developers
to target subgroups by implementing one or more of the
following strategies:
Tapping into the worker-accommodation
segment as Metro Manila’s young workforce
looks for affordable studio or one bedroom units;
Targeting expatriates who prefer the two and
three-bedroom units within CBDs; and
Establishing their own leasing teams to market
to particular clients.
Given the falling occupancy rates in CBDs, it would
practical for developers with projects under construction
within and outside the established business districts to
organize their own leasing arms in order to assist their
buyers to lease out their units and attain the promised
yields.
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For more information: Contributors:
Randwil Dinbo Macaranas Senior Research Manager +632 858 9047 randwil.macaranas@colliers.com
Joey Roi Bondoc Research Manager +632 858 9057 joey.bondoc@colliers.com
David A. Young Managing Director Randolf Ilawan
Research Assistant
Richard Raymundo Deputy Managing Director
Copyright © 2016 Colliers International.
The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are
encouraged to consult their professional advisors prior to
acting on any of the material contained in this report.
Copyright © 2015 Colliers International.
The information contained herein has been
obtained from sources deemed reliable.
While every reasonable effort has been
made to ensure its accuracy, we cannot
guarantee it. No responsibility is assumed
For more information:
Market Contact Name
Title | Market
+1 00 000 0000
Name.Name@colliers.com
Market Contact Name
Title | Market
+1 00 000 0000
Name.Name@colliers.com
Contributors:
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Record arrivals
boost occupancy
amid new
completions Joey Roi Bondoc Research Manager
Hotel occupancy in the second half of the year rose
due to record-high tourist arrivals and sustained
growth in tourist expenditures. This partly offsets
the impact of the completion of additional rooms in
the Entertainment/Pasay Bay Area and established
business districts. Colliers expects more than 4,000
rooms being added to Metro Manila's hotel room
stock for 2017. With sustained arrivals from
traditional visitor-generating markets such as South
Korea and China, Colliers recommends the
development of more three- and four-star hotels,
particularly in the fringes of Metro Manila. With the
Philippines emerging as a viable location for major
international events, Colliers encourages developers
to apportion larger space for meetings, incentives,
conferences, and exhibits (MICE) facilities.
Metro Manila Hotel Room Stock
Source: Colliers International Philippines Research
Forecast at a glance
Demand The demand for accommodation in Metro Manila should continue to be driven by the Philippines’ traditional visitor-generating markets such as South Korea, United States, and Japan. Colliers sees total arrivals in 2017 rising by 10% to 6.6 million. Demand among three- and four-star hotels will continue to drive the market.
Supply
Colliers projects about 4,000 new hotel rooms being completed in Metro Manila this year. Bulk of the new rooms will be in the Entertainment/Pasay Bay Area.
Vacancy rate
Given the encouraging tourist arrival figures, Colliers expects hotel occupancy in Metro Manila to hover between 65% and 70% over the next twelve months.
Room rate
Colliers sees hotel rates increasing by a marginal 2%-5% over the next twelve months.
-15%
-10%
-5%
0%
5%
10%
15%
20%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
F
20
18
F
20
19
F
20
20
F
Number of Hotel Rooms (LHS) YoY Change (RHS)
Colliers Quarterly
PHILIPPINES | HOTEL Q4 2016 9 February 2017
2 Colliers Quarterly | 9 February 2017 | PHILIPPINES | HOTEL | Colliers International
Record high arrivals push hotel occupancy up
The Philippines welcomed a total of 5.39 million foreign
visitors from January to November 2016, 12% higher
than the 4.8 million international arrivals recorded for the
same period in 2015. The January to November figure
also exceeds the total arrivals in 2015 of 5.36 million.
Given this encouraging trend, Colliers sees total
international visitors to the Philippines breaking the 6.0
million mark for 2016. The Department of Tourism’s goal
is to attract 7.0 million tourists this year but Colliers
believes that a 10% YoY growth or 6.6 million in total
arrivals is more realistic.
Visitor Arrivals
*As of November 2016
Source: Colliers International Philippines Research
South Korea remained the country’s largest visitor-
generating market with arrivals reaching 1.33 million,
accounting for nearly a quarter of the total. Among the
country’s largest markets, China and Taiwan posted the
fastest growth at 39% and 30%, respectively. The
Philippine Embassy in China noted that the number of
Chinese nationals applying for tourist visas to the
Philippines rose to 1,400 daily from an average of 400
per day in the previous quarter. The surge in Chinese
arrivals is attributed to the Philippine government’s
improving relations with China. Colliers sees the country
attracting more Chinese visitors as a result of President
Duterte’s visit to China in October last year. The
Philippine and Chinese governments signed an
agreement on tourism cooperation that includes
exploring a possible increase in capacity entitlements in
air services and encouraging airlines to open new flights
between Philippine cities in the Visayas and Mindanao
regions and Chinese cities.
Furthermore, the country‘s successful recent hosting of
the ASEAN Tourism Forum, Routes Asia, APEC Summit
and Miss Universe pageant has helped increase arrivals
and raise the Philippines’ attractiveness as a meetings,
incentives, conferences and exhibitions (MICE)
destination in the region. Among the major international
events that the Philippines will host this year are Madrid
Fusion, the ASEAN Summit, and Hotel Show
Philippines.
As a result, Q4 2016 hotel occupancy in Metro Manila
increased by two-percentage points from 69% two
quarters ago to 71%. The growth was partly offset by the
completion of more than 1,700 new hotel rooms in 2016.
Of the rooms that went online in 2016, about 40% were
completed in H2 2016, in time for the arrival of Overseas
Filipino Workers (OFWs) for the holiday season. Notable
completions during the period include the Mercure Hotel
(150 rooms) in Ortigas; soft opening of I’M Hotel in
Makati Fringe (150 rooms); and the remaining rooms of
the Conrad (140 rooms) in the Pasay Bay Area and
Shangri-La at the Fort (370 rooms).
Casino-hotels still a major supply driver but face lower occupancies
The opening of Okada Manila’s 993 rooms has been
pushed back to February 2017. The rooms were
originally due to be completed in Q4 2016. Once
completed, Okada Manila will become the biggest
integrated casino resort in the country. It will offer 500
table games and 3,000 electronic gaming machines.
Aside from Okada, other five-star hotels expected to go
online this year are Grand Hyatt Manila in Fort Bonifacio
and the expansion of Solaire Manila and Maxims Tower
in the Pasay Bay Area.
New Hotel Room Supply
Source: Colliers International Philippines Research
Ayala will open hotels under the Seda brand this year.
These include the 250-room Seda hotel in Circuit Makati
and the 440-room Seda Hotel in Vertis North, Quezon
City. The latter will be complemented by a casino that
Bloomberry Resorts is planning to build within the Vertis
North property. The planned casino will capture Northern
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
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200
5
200
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200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6*
Visitor Arrivals Average Occupancy (RHS)
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2016 2017F 2018F 2019F
Number of Hotel Rooms
3 Colliers Quarterly | 9 February 2017 | PHILIPPINES | HOTEL | Colliers International
Quezon City and Central Luzon residents. It will also
benefit from increased international flight frequencies in
Clark airport as well as improved access once the Metro
Rail Transit (MRT) 7 is completed. Earlier, Bloomberry
disclosed to the Philippine Stock Exchange (PSE) that it
plans to start constructing the casino in mid-2017,
although the plans are still subject to regulatory and
government approvals.
Should all projects be completed as scheduled, Colliers
expects the addition of more than 4,000 rooms to the
metropolitan’s hotel room stock for 2017. More than half
of the hotel rooms expected to be completed this year
will come from casino hotel projects which could depress
occupancy rates in the Pasay City/Entertainment area.
Average published rates for five-star rooms grew 3%
HoH in H2 2016 to USD370 a night. Rates for three-star
accommodation rose 9% HoH to USD186 while rates for
four-star rooms grew by 5% HoH to USD247. Rates
among three and four star hotel rooms recorded the
fastest growth due to higher demand from Chinese and
Korean tourists and OFWs who spent Christmas
holidays in Metro Manila.
Three- and four-star hotels to corner bulk of Asian tourists; overall occupancy to reach 65%-70%
While casino hotels are struggling to achieve higher
occupancies, three-star and four-star hotels are gaining
popularity especially among Japanese, Taiwanese, and
Chinese tourists. In order to cash in on the expected
surge of Chinese tourists, Double Dragon said it will
build five more Jinjiang hotels this year. This is in line
with the company’s goal of raising its room count target
to 2,000 from the current 866. New hotel lines from other
developers have emerged to compete for the share of
the growing number of tourists, travelling entrepreneurs,
as well as local vacationers. Other brands successfully
competing in this segment are Seda and Crowne Plaza,
among others.
Colliers believes there is a massive room for growth in
this sub-segment especially because this is driven by
both the local and foreign tourists, particularly those from
Asian countries. Thus, Colliers encourages developers
to build more three and four star hotels both in Metro
Manila fringes and key provinces.
Colliers sees occupancy rates in the entire metropolitan
hovering between 65% and 70% over the next twelve
months. The sustained growth in arrivals supported by
major international events that the country will host this
year, should keep occupancy rates stable despite the
projected new completions.
For more information: Contributors:
Randwil Dinbo Macaranas Senior Research Manager +632 858 9047 randwil.macaranas@colliers.com
Joey Roi Bondoc Research Manager +632 858 9057 joey.bondoc@colliers.com
David A. Young Managing Director Randolf Ilawan
Research Assistant
Richard Raymundo Deputy Managing Director
Copyright © 2016 Colliers International.
The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are
encouraged to consult their professional advisors prior to
acting on any of the material contained in this report.
Copyright © 2015 Colliers International.
The information contained herein has been
obtained from sources deemed reliable.
While every reasonable effort has been
made to ensure its accuracy, we cannot
guarantee it. No responsibility is assumed
For more information:
Market Contact Name
Title | Market
+1 00 000 0000
Name.Name@colliers.com
Market Contact Name
Title | Market
+1 00 000 0000
Name.Name@colliers.com
Contributors:
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Market Contact Name
Title | Market
Demand surges
as manufacturers
take advantage of
new trade deals Joey Roi Bondoc Research Manager
The government's continued efforts to attract more
manufacturing investments should lead to greater
demand for industrial lots and facilities in the Cavite-
Laguna-Batangas corridor. Colliers sees the surge in
manufacturing investments from Japan, China, and
Taiwan being sustained over the near to medium
term as foreign manufacturers take advantage of the
Philippines' preferential trade deals with the
Association of Southeast Asian Nations (ASEAN)
and the European Union (EU). While Cavite, Laguna,
and Batangas remain as popular locations for
manufacturers given their proximity to Metro Manila
and the planned implementation of crucial
infrastructure projects, Colliers recommends that
developers start looking at other viable industrial
locations across the country such as Bataan,
Bulacan, Tarlac, and Pangasinan. This is particularly
important for cost-conscious manufacturers that
look for cheaper industrial lease rates. Colliers
encourages developers to take advantage of the
current administration's thrust to develop more
industrial zones throughout the country.
Philippine Industrial Supply Stock by Region of Highest Supply (Manufacturing)
Source: Philippine Economic Zone Authority
Forecast at a glance
Demand The demand for industrial space and standard factory buildings (SFBs) in the Cavite-Laguna-Batangas area should remain firm on the back of continued influx of investments from foreign manufacturing firms. Colliers sees the demand for industrial space spilling over to other provinces in Northern and Central Luzon.
Supply
Colliers expects the Cavite-Laguna-Batangas corridor’s industrial stock to grow between 5% and 10% over the next twelve months as developers respond to manufacturers’ increasing appetite for industrial space.
Vacancy rate
Colliers projects the overall vacancy of Cavite, Laguna, and Batangas industrial stock dropping to between 8% and 9% in 2017 from 9.5% as of end-2016.
Rent
Colliers expects industrial land and building leasehold rates to grow between 4% and 7% over the next twelve months.
R-III 57.7%
R-IV 14.7%
R-VII 7.7%
R-X 5.8%
R-VIII 4.8%
Colliers Quarterly
PHILIPPINES | INDUSTRIAL Q4 2016 9 February 2017
2 Colliers Quarterly | 9 February 2017 | PHILIPPINES | INDUSTRIAL | Colliers International
Manufacturing investments drive GDP, demand for industrial space
Manufacturing investments continue to sustain the
country’s economic growth. The sector accounted for
about 23% of the country’s annual GDP for the past
three years. Manufacturing should sustain the country’s
economic growth over the medium term. Central Bank
data reveal that foreign direct investments (FDIs) for the
first 10 months of 2016 reached USD6.2 billion and the
manufacturing sector was among the primary recipients
of fresh investments. Colliers sees more manufacturing
investments flowing into the country over the medium
term given the investments pledged by foreign
businessmen during President Duterte’s visit to Japan
and China in October last year. Among these include
Toyota’s and Mitsubishi’s commitments to expand their
assembly operations in the Philippines.
Colliers also sees the surge in manufacturing
investments from Japan, China, and Taiwan being
sustained over the near to medium term as foreign
manufacturers take advantage of the country’s
preferential trade deals with ASEAN and the EU. Japan’s
Shimano Inc., one of the world’s largest manufacturers
of bicycles and parts, opened a PHP1.3 billion (USD26.5
million) facility at First Philippine Industrial Park in
Batangas to take advantage of the Philippines’
preferential trade deal with the European Union.
Shimano exports bicycle components to EU.
Meanwhile, total investment pledges registered with the
Philippine Economic Zone Authority (PEZA) for the first
nine months of the year reached PHP93.3 billion
(USD1.9 billion). The Cavite-Laguna-Batangas region
cornered 28% of the total investment commitments from
January to September 2016. According to PEZA,
“majority” of the investments in the region are intended
for manufacturing projects.
This indicates that the Cavite-Laguna-Batangas region
should expect more manufacturing investments in the
medium term.
Among the Korean and Japanese firms that will either
establish or expand existing operations in the Cavite-
Laguna-Batangas area include Canon, Nikkoshi,
Calamba Shinei, Jisoo, and Tech-Sonic. These firms are
involved in the manufacture of laser beam printers and
accessories, medical instruments, packaging supplies,
and ultrasonic welding machines.
Industrial Supply Stock (Manufacturing)
Region IV-A H1 2016 H2 2016 Change (HoH)
Cavite 2,451.4 2,451.4 -
Laguna 1,439.9 1,439.9 -
Batangas 3,006.6 3,167.4 5.3%
TOTAL 6,897.9 7,058.7 2.3%
Source: Colliers International Philippines Research
Industrial Vacancy Rates (Manufacturing)
Region IV-A H1 2016 H2 2016
Cavite 7.93% 7.73%
Laguna 3.91% 3.84%
Batangas 18.39% 17.84%
TOTAL 10.09% 9.82%
Source: Colliers International Philippines Research
Fresh manufacturing investments propel demand for ecozones, raise lease rates
Industrial space registered with the Philippine Economic
Zone Authority (PEZA) rose marginally to 58,600 ha from
58,430 ha in H1 2016. Among the industrial parks in
Batangas that recorded expansions include First
Philippine Industrial Park II and Lima Technology Center.
Total industrial stock in the Cavite-Laguna-Batangas
area reached 7,060 ha as of H2 2016, up from 6,898 ha
in the first half of 2016. Colliers sees the demand for
industrial space in the Cavite-Laguna-Batangas corridor
growing over the near term and this should encourage
property firms to develop more industrial parks in the
region.
Industrial Lease Rates (PHP / sq m / month) (Manufacturing)*
Region IV-A H1 2016 H2 2016
Leasehold (Land) 63 67
Lease Rates (SFB**) 222 225
*Average in Cavite, Laguna, and Batangas
**Standard Factory Building
Source: Colliers International Philippines Research
3 Colliers Quarterly | 9 February 2017 | PHILIPPINES | INDUSTRIAL | Colliers International
A slight increase in industrial stock coupled with an
uptick in demand led to a decline in the overall vacancy
of Cavite, Laguna, and Batangas industrial stock to 9.5%
as of H2 2016 from 10.1% in the first six months of 2016.
Vacancy in Cavite was relatively stable at 7.7% from
7.9%. Batangas’ vacancy dropped to 18% from 18.4%
as companies involved in the manufacture of plastic
injection molds for printers and bikes established their
facilities. Laguna is still the preferred location of high-
value manufacturing firms as vacancy remains low at
3.8% from 3.9% in H1 2016. This should decline further
as Laguna continues to attract manufacturers of
electronic products and given the Japanese car
assemblers’ commitment to expand operations. Colliers
sees the overall vacancy of Cavite, Laguna, and
Batangas industrial stock dropping to between 8% and
9% in the next twelve months from 9.5% as of end-2016.
This decline in vacancy is not surprising as major
manufacturing investors continue to gravitate toward the
Cavite-Laguna-Batangas area due to its proximity to the
country’s capital, availability of adequately-skilled labor
force, relatively cheaper wages, and improving
infrastructure. Crucial in funneling more manufacturing
investments to the Cavite-Laguna-Batangas corridor is
the planned revival of a rail cargo between Manila port
and an inland container terminal facility in Laguna.
Average land leasehold rates in Cavite, Laguna, and
Batangas rose by 7% HoH to an estimated PHP67
(USD1.4) from PHP63 (USD1.3) per sq m a month while
leasehold rates for warehouses and logistics facilities
rose to PHP225 (USD4.6) from PHP222 (USD4.5) per
sq m per month. Colliers expects industrial land and
building leasehold rates to grow by about 4% and 7%
over the next twelve months given the projected inflow of
more manufacturing investments from perennial sources
such as Japan and China.
The Duterte administration’s continued efforts to attract
more manufacturing investments should lead to higher
demand for industrial lots and facilities in CALABARZON
and this, coupled with limited supply, should further raise
land values in the region.
Expansion of alternative industrial hubs
Aside from Southern Luzon, interest in other viable
locations for industrial park development such as Central
Luzon has also been increasing. According to Bases
Conversion Development Authority (BCDA) about 20
Japanese firms have expressed interest to put up
facilities in Clark Green City while a mix of local and
foreign manufacturers are exploring the possibility of
establishing operations in the 31-hectare Alviera
Industrial Park in Porac, Pampanga.
The resurgence of the Philippines’ manufacturing sector
coupled with the improved infrastructure connectivity
brought about by railways and expanded highways
should enable the country to attract more investments.
While Southern Luzon, especially Cavite, Laguna, and
Batangas remain as popular locations for manufacturers,
developers should start looking at other feasible
industrial locations across the country such as Bataan,
Bulacan, Tarlac, Pangasinan, and La Union in Luzon;
Cebu in Visayas; and Davao in Mindanao. This is
particularly important for low-value and cost-conscious
manufacturers looking for industrial parks that offer
cheaper lease rates for industrial space and facilities.
Colliers proposes that developers take advantage of the
current administration’s thrust of developing more
industrial zones throughout the country. The
government, on the other hand, will only be able to
entice more firms to develop industrial space if it
releases concrete and consistent policies guiding the
grant of incentives to industrial park developers and their
locators.
For more information: Contributors:
Randwil Dinbo Macaranas Senior Research Manager +632 858 9047 randwil.macaranas@colliers.com
Joey Roi Bondoc Research Manager +632 858 9057 joey.bondoc@colliers.com
David A. Young Managing Director Randolf Ilawan
Research Assistant
Richard Raymundo Deputy Managing Director
Copyright © 2016 Colliers International.
The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are
encouraged to consult their professional advisors prior to
acting on any of the material contained in this report.