INSIGHTS ON THE PHILIPPINE REAL ESTATE MARKET...PHILIPPINE GDP $292.45B Source: Trading Economics,...

David Leechiu – CEOMarch 2017

1

INSIGHTS ON THEPHILIPPINE REAL ESTATE MARKET

THE PHILIPPINES

The Philippines

3

103million

POPULATION

LITERACY RATE

97.5%

CREDITRATING

BBBS & P

MOODY’S Baa2

FITCH BBB-

6.8%GROWTHGDP

INFLATION RATE

2.6%

D E B T

E X T E R N A L

$76.62B (SEPT 2016)

47.4% of GDP(1H2016)

P U B L I C

LABOR FORCE68.1 Mn

FOREIGN RESERVES

$81B

24 years oldAverage age of Filipinos

PHILIPPINEGDP

$292.45B

Source: Trading Economics, BSP

Foreign Investment in the Philippines

4

40%FOREIGN EQUITY LIMIT

30%CORPORATE INCOME TAX

LEASE TERM

25 yearsRenewable for another 25 years

50 yearsRenewable for another 25 years

In some cases,

PERSONAL INCOME TAX

32% If annual net taxable income is at least P500,000 annual income (USD10,000)

Philippine Foreign Direct Investments (FDI)

5Source: World Bank

Government’s Socioeconomic Agenda

6

Current macroeconomic policies

PRES. DUTERTE’S 10-POINT SOCIOECONOMIC AGENDA

Tax Reform Ease of Doing Business

InfrastructureSpending

Rural andvalue chaindevelopment

Security andland tenure

Human CapitalDevelopment

Science, technology, andcreative arts

Social protectionprograms

ResponsibleParenthood &ReproductiveHealth

Source: DOH

Demand Drivers

Urban Population Growth

It is projected to rise to 56.3% by 2030 and 66% by 2050.

BPO Employee’sHousing Need

Growing number of BPO workers

Need to liveneartheir

workplace.

Overseas FilipinoRemittances

48.6%of Filipinoslive in Urban Areas*

10 millionOF’s can invest in Real Estate

More than 50%

of remittances are real estate related

Source: Keynote speech of Sec. Arsenio M. Balisacan Director General of NEDA“The Philippine Economic Growth and the Growth in the Property Sector” 2015* 2010

7

Housing backlog needs to be addressed and

demand for dormitories will rise.

Quezon City

Ortigas/Pasig

Makati

BGC / Taguig

Bay/Pasay

Alabang

Parañaque

Las Pinas

Manila

Manda-luyong

San Juan

Metro Manila Cityscapes

ORTIGAS CBD. ROCKWELL BUSINESS CENTER. ARCOVIA CITY. SILVER CITY. CAPITOL COMMONS.

MAKATI MAKATI CBD. CENTURY CITY. ROCKWELL CENTER. CIRCUIT MAKATI.

ORTIGAS

BGC BONIFACIO GLOBAL CITY. MCKINLEY WEST. MCKINLEY HILL.UPTOWN. VERITOWN.

3 MAJOR CBDs

46 BUSINESS PARKS

QUEZON CITY. UP TECHNOHUB. EASTWOOD CITY. ETON CENTRIS.

ARANETA, CYBERARK. ROBINSONS BRIDGETOWNE IT PARK. VERTIS NORTH. UP TOWN

CENTER. FAIRVIEW TERRACES. ALI CLOVERLIEF BALINTAWAK. NUVO. MANDALUYONG. GREENFIELD DISTRICT. ROBINSONS CYBERGATE. ROCKWELL SHERIDAN. SAN JUAN.

ROCKWELL HILLSIDE. MUNTINLUPA. FILINVEST CORPORATE CITY. LA FUERZA.

NORTHGATE CYBERZONE. MADRIGAL BUSINESS PARK. ALABANG WEST. TAGUIG. ARCA

SOUTH. LAS PINAS. PORTOFINO. EVIA. PASAY. NEWPORT CITY. SM MALL OF ASIA

COMPLEX. METROPOLITAN BUSINESS PARK. DOUBLE DRAGON CYBERCAMPUS. FILINVEST

CYBERZONE PASAY. PARANAQUE. ASIAWORLD CITY. ASEANA BUSINESS PARK. AYALA

ASEANA. MANILA. CITYPLACE. SAN LAZARO.

8

• Most of these districts will be fully developed by 2018.• There will be little land left for development.• The most important districts moving forward will be

Bonifacio Global City, Bay Area, Filinvest City, and Arca South.

Regional Cityscapes

LAOAG. CAMELLA. VALDEZ CENTER. CAGAYAN. CAGAYAN SPECIAL ECONOMIC ZONE AND FREEPORT. BAGUIO.

BAGUIO AYALA LAND TECHNOHUB. SM BAGUIO CYBERZONE BUILDING. PCH IT CENTER. ABANAO SQUARE. TARLAC.LUISITA BUSINESS PARK. TARLAC PROVINCIAL IT PARK.

BULACAN. PDC TECHNOPARK. ALTARAZA. FIRST BULACAN IT PARK. CIUDAD DE VICTORIA. ABS-CBN CAMPUS.

URDANETA. CB MALL.

Over 80 I.T. parks and

business districts

Countryside development going throughunprecedented construction boom driven by

BPO and tourism.

PAMPANGA. CLARK SPECIAL ECONOMIC ZONE. PHILEXCEL BUSINESS PARK. BERTAPHIL BUSINESS PARK. SM CITY CLARK. CLARK GREEN CITY. GGLC.

NEPO CENTER. ALVIERRA. CAPILION. AKLAN. BORACAY NEW COAST. CAPIZ. PUEBLO DE PANAY

TECHNOPARK. ILOILO. ILOILO TECHNOHUB. ATRIA PARK DISTRICT. GAISANO CAPITAL. AYALA SICOGON.

ILOILO BUSINESS PARK. BACOLOD. LOPUE’S EAST IT CENTER. ONE AND TWO SANPARQ. THE

BLOCK IT PARK. ROBINSONS CYBERGATE CENTER.

LOPUE’S SOUTHSQUARE IT PARK. BACOLOD IT PARK. CAPITOL CENTRAL. DUMAGUETE.

DUMAGUETE BUSINESS PARK. LINKSYS IT PARK. LP IT PARK. YY STAR DAS.

CAVITE. BATANGAS. LAGUNA. VERMOSA.PONTEFINO. SUNTECH IT PARK. HAMILO COAST.

SMDM IT CENTER. SOUTHFORBES IT PARK. SOUTHWOODS. NUVALI. ETON CITY.

GREENFIELD CITY. PUERTO AZUL. CEBU. CEBU IT PARK. CEBU SRP.

CEBU BUSINESS PARK. MACTAN NEWTOWN. ABOITIZLAND CEBU. WATERFRONT TOWNSHIP.

CITTA DE MARE. SMC. OAKRIDGE BUSINESS PARKDAVAO. MATINA IT PARK. ABREEZA. DAVAO PARK

DISTRICT. LANANG IT PARK. DAMOSA IT PARK. NORTHPOINT. CAMELLA. CIUDADES. LUBI ISLAND

PLANTATION.

Approximately 132,000 hectares of master-planned or

mixed-use developments

PALAWAN. LIO RESORT TOWN. SAN VICENTE. QUEZON. BALESIN ISLAND

CLUB

ZAMBOANGA. MEGALAND MALL. CITYMALL ZAMBOANGA.

ZAMBOECOZONE AND FREEPORT NEW TOWNSHIP. ZAMBOECOZONE

HIGHLANDS. CAGAYAN DE ORO.LIMKETKAI CENTER. SM CITY BPO 2.

CENTRIO. ONE PROVIDENCE.

LAOAG

CAGAYAN

BAGUIO

TARLAC

PAMPANGABULACAN

QUEZONCAVITE /

BATANGAS / LAGUNA

CAPIZ

PALAWAN ILOILO

BACOLOD

DUMAGUETE

DAVAO

ZAMBOANGACAGAYAN DE ORO

PANGASINAN

9

21

4

2

9

1

11

1

24

69 CEBU

4

4

4

GENERAL SANTOS

91

Number of townships

Legend:

51

Unprecedented countrysidedevelopment.

1AKLAN

Growth Sectors

Source: UNWTO, iBPAP, World Bank 10

TourismReceipts

BPO Revenue

Overseas Filipinos

Remittance

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E

PH Growth Amidst Historical Events

Bombing in ZamboangaCapture and sentence ofJemaah Islamiyah2

00

2

EDSA IIEDSA III9-11Phil. General ElectionsDos Palmas Kidnapping

Oakwood MutinySARS OutbreakJemaah Islamayah escapeJose Pidal plunder caseDavao airport bombing2

00

3

Infanta Mud SlideSuperferry BombingPhil. General ElectionsGeneral Santos Christmas Bombing2

00

4

V-day BombingHello Garci ScandalGeneral Santos City Mall Bombing2

00

5

MilenyoSouthern Leyte Mud SlideState of Emergency Declaration2

00

6

ZTE ScandalConviction of ERAPGlorietta 2 BombingManila Peninsula MutinyCotabato Bus Station BombingCongress Bombing

20

07

Cotabato City BombingCes Drilon KidnappingMV Princess of the Star SankZTE-NBN IrregularitiesMeralco Stockholders Meeting2

00

8

H1N1 OutbreakTyphoon OndoyTyphoon PepengTyphoon MarakotSuperferry sank in ZamboangaDeath of Corazon AquinoGreenbelt 5 RobberyMaguindanao Massacre

20

09

Typhoon MegiManila Hostage CrisisPhil. General ElectionsDLSU explosion during Bar ExamsInauguration of Pres. Noynoy AquinoVizconde Massacre Case Finished

20

10

Makati Bus Explosion

Tropical Storm Juaning

Typhoon Sendong

Arrest of former Pres. Gloria Arroyo

20

11

Corona Impeachment TrialTyphoon PabloCebu Governor Suspension6.9 Magnitude Earthquake Negros and CebuTropical Dispute with China

20

12

Super Typhoon HaiyanCebu Ferry TragedyKilling of Taiwanese FishermanSenate Pork Barrel Scam Hearing5.4 Magnitude Earthquake Cebu and Bohol

20

13

Typhoon HagupitBinay Alleged Corruption HearingsDMCI Construction Hearings2

01

4

Pres. Aquino’s Final SONAKentex Manufacturing Slippers Factory FireTyphoon NonaTyphoon KoppuPNP-SAF killed in Maguindanao

20

15

GDP expanded by 7%National and Local ElectionsRodrigo Duterte proclaimed as new Pres.Pres. Duterte enjoys a record high trust rating of 92%Spratly Islands DisputeDavao BombingWar on DrugsAbove investment grade rating (BBB)State of Emergency Declaration

20

16

20

01

11

METRO MANILA

OFFICE MARKET

Metro Manila Current vs. Pipeline Supply

Current vacancy rate across Metro Manila is at an all time low of 3.8%.

As of March 2017, there is a record number of 518,500 sqm pre-commitments for office space for 2017.

Bonifacio Global City, Quezon City, and Bay Area will more or less double its office space stock in the next 6 years.

Future office supply will mostly come from BGC, followed by Ortigas/Pasig/Mandaluyong, and Bay Area.

13

*Gross Leasable Area in thousands (sqm)

Metro Manila Supply PipelinePer District, per Year (2017 to 2023E)

14


FY 2016 Supply and Demand

By Location

16

Metro Manila Demand Activity 2016 | By Location and Industry

By Industry

70% of demand are coming from the information technology – business process management (IT-BPM) industry and

60% prefer Bonifacio Global City (BGC) over any other district.

*Online gaming transactions are concentrated in the Bay Area


2017E Supply and Demand

2017 supply is also at an historical high of 1,269,618 square meters, most of which are in BGC, constructed at a much higher grade of specification, materials,

workmanship, and quality, and catering primarily to multinational corporate tenants. Nonetheless, demand for 2017 is forecasted to reach new heights judging by the significant and unprecedented level of pre-commitments of 518,500 sqm by

tenants to buildings under construction.

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Metro Manila Demand Activity 2017E | By Location and Industry

• IT-BPM tenants, a significant driver in the demand for office space, need to locate in PEZA-certified buildings. • Currently, there is a risk of scarcity of such PEZA-registered projects, as so few have been granted this status in the last seven

months—only two buildings in Metro Manila, one in Luzon, and one in the Visayas.

PEZA Status2016, 2017E and 2018E Office Buildings

• For the supply in 2017, only 15% are PEZA spaces with vacancies; others are either leased or non-PEZA. • Much of the vacant PEZA buildings are due for completion at the end of 2017 and are at risk of delays (Q1- or Q2-2018)• We forecast rents for these PEZA buildings to be driven up, given the limited supply and the significant demand from IT-BPM tenants

for them.

PEZA StatusBy District | 2017E to 2023E


Total PEZA-Accredited space: 1,314,148 sqm (36 buildings)Total space under application for PEZA: 2,210,445 sqm (81 buildings)Total non-PEZA space: 485,998 sqm (17 buildings)

4.01M sqm

Total supply2017-2023E

Metro Manila Current SupplyDeveloper Market Share (1960’s to 2016)

21

Metro Manila Supply Pipeline Developer Market Share (2017 to 2023E)

22

Metro Manila Rental Range(PhP per sqm. per month)

23

Land Values by Business District

BusinessDistrict

*FARRange

Y-o-YIncrease

%(2014-2015)

Land ValuesPhp/sqm(2015)

AccommodationValue

GFA/sqm(2015)

Land ValuesPhp/sqm(2016)

AccommodationValue

GFA/sqm(2016)

Y-o-YIncrease

%(2015-2016)

Filinvest City 6 – 14 17% 99k – 264k 19,000 120k-280k 20,000 6%

Arca South 6 – 8 0% 210k – 220k 28,000 210k-280k 35,000 27%

Bay City 6 38% 150k – 180k 30,000 198k 33,000 10%

Bonifacio Global City

6 – 15 14% 270k – 600k 40,000 360k-900k 60,000 50%

Makati 6 – 16 27% 210k – 560k 35,000 300k – 800k 50,000 43%

Ortigas N/A 10% 109k – 223k N/A 200k – 350k N/A 57%

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Bonifacio Global City still has the highest land values in the Philippinesin the last 10 years.

PROVINCIAL

OFFICE MARKET

PROVINCES Supply (sqm)

CEBU 464,766

CALABARZON 258,777

DAVAO 92,919

PAMPANGA 126,614

ILOILO 72,168

BACOLOD 36,000

REST OF LUZON 156,590

REST OF VISAYAS 40,039

REST OF MINDANAO

41,565

TOTAL 1.29M sqm

Provincial Pipeline(2017 to 2022E)

Provincial Pipeline Developer Market Share (2017 to 2022E)

27

IT-BPM MARKET

Philippine IT-BPM SectorRevenue and Employment Forecast

*Source: IBPAP’s Roadmap 2022, Frost & Sullivan analysis, IBPAP data for 2010

2022 Outlook Philippines will move up the value curve with the help of high-value services.

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BPO Distribution

30

CEBU

MINDANAO

NCR

CALABARZON

NORTH AND CENTRAL LUZON

REST OF VISAYAS

6%

3%

70%

3%

15%

3%

1.15million

Estimated Number of FTEs by end of 2016

LEGEND

Luzon

Visayas

Mindanao

Next Wave CitiesRecommended Provincial Locations

Healthy labor pool, local government support, fiber optic connectivity, accessibility and strong tourism play attract IT-BPM companies to locate in these provinces.

3131

CAGAYAN

AKLAN

BOHOL

LAGUNA

MISAMIS ORIENTAL

LEYTE

RIZAL

LEGEND

Untapped locations for IT-BPMs

Presence of 3+ IT-BPM locators

• Calamba

• Tuguegarao

• Cagayan De Oro

• Tacloban

• Kalibo

• Imus • Dasmarinas• Rosario• Bacoor

CAVITE

• Taytay• Binangonan• Antipolo• Cainta

PANGASINAN

• Tagbilaran

BATANGAS

• Batangas City

• Dagupan

BULACAN

• Meycauayan• Malolos

RESIDENTIAL MARKET

33

Residential Outlook2017

Only condominiums will continue to grow in NCR because there is no more supply of developable land for residential open lots, but reaching a plateau

Developers have no more significant landbank, thus the direction to go out of NCR

BPO sector creating a new breed of condominium dwellers

Significant unmet housing demand needs a unified government effort

Strong presence of OFWs, major bulk of growing middle income market

Construction delays will continue to temper growth across real estate segments

Thriving condo living to drive demand for home furnishings, accessories.

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Continuous Increase in Residential Constructions (Philippines)

• Top 5 regions in terms of number

of construction:

Region IV-A (CALABARZON) 25%,

Region III (Central Luzon) 11%

NCR 10%

Region VII (Central Visayas) 10%

Region X (Northern Mindanao) 7%

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Top 10 Remitting Countries to PHAs of 2016

*Source: Bangko Sentral ng Pilipinas

✓ Philippines is the 3rd largest recipient of foreign remittances next to India and China

✓ USA is the highest contributor with 33% of total remittance flows

Jan-Dec 2015US$25.6Bn

Jan – Dec 2016US$26.8BnVS

60% of remittances go to the real estate sector

Residential Condominium GFAvs. Office GLA vs. Interest rates

*Source: BSP; PSA36

37

Residential Condominium Supply

*As of December 2016

*Package Price based on most saleable unit type per development (Mostly Studio -2BR with sizes

ranging from 22-62 sqm)

38

Price per square meter

Minimum price Maximum price

39

Historical Residential Rental Rate

*Based on typical studio or 1BR unit

Residential Historical Land Values(2011 to 2015)

40

TRENDS

Tourism

Artificial Intelligence

2015 Int’l Tourist ArrivalsAsia Pacific

Source: UNWTO 42

Philippine Tourist ArrivalsDomestic and International

1H2016: Total of 44 million tourist arrivals

Source: DoT 43

44

Philippine Tourism

Source: DOT

TOTAL (Philippines)No. of Accommodation

10,194

No. of Rooms240,435

Ave. Occupancy Rate67%

Ave. Length of Stay2 Days

National Tourism Development Plan 2017 -2022 target areas:

- Enhanced air access- Increased accommodation capacity- Improved human resources- Stepped up marketing campaigns

Luzon

Visayas

Mindanao

Philippine Flight Ratios

45

Land mass (ha) PopulationNo. of Airportsand Flights*

Annual Passenger Footprint

North Luzon 9,566,801 35,460,000 7

49 flights daily1,527,333

South Luzon (excluding Metro Manila and

Palawan)

3,019,850 8,700,6607

30 flights daily241,711

Metro Manila 63,600 12,221,000 1


*Palawan 1,489,000 994,3404

42 flights daily909,635

Visayas City(excluding Cebu City)

5,629,100 24,299,35412


Cebu City 31,500 866,1711


Mindanao(excluding Davao City)

9,753,000 23,167,70414


Davao City 244,000 1,449,2961


*Palawan will become the most accessible with 4 upcoming

new and expanded airports completed by 2017

*inbound and outbound flights. No. of airports include pipeline.

Source: Civil Aviation Authority of the Philippines (via Wikipedia website), ourairports.com, NSCB statistics

Metro Manila Hotels: 2010 to 2019

46

Top 5 Source Markets

Source: DoT 47

Chinese Tourist Arrivals2014 - 2016

Source: DOT, China National Tourism Administration 48

Artificial Intelligence

49

In the next 15 years, 45% to 75% of existing

offshore jobs in the financial services sector

will be performed by robotic process

automation. - KPMG

Automation would erase

22.7 million US jobs by 2025

By 2018, global sales of industrial robots

will grow an average y-o-y by 15% - units sold will double to

around 400,000 units

Global Robotics Market is expected

to reach USD 82.7 billion by 2020

Machine-human parity may reach a

1:1 ratio by

2040

Asia was the

biggest robot market (139,000

units) in 2014, 41% higher than in 2013

Tech Companies spent USD 8.5 billion last 2015 on artificial

intelligence, four times more than in

2010

Worldwide market value for robot

systems in 2014 is estimated to be

USD 32 billion

2016 FundingUSD 974M

2020 FundingUSD 70B

Artificial Intelligence Funding

ABOUT

LEECHIU PROPERTY CONSULTANTS

MISSIONTo deliver superior value and profitable real estate solutions for like-minded partners through local, dynamic & insightful property-related

expertise in corporate leasing and investments.

To be the advisor of choice who provides the most strategic and outstanding property-related advice, solutions and services to our

customers. Our company values unity, integrity and passion for excellence.

VISION

Together, our firm, redefines the real estate industry by being a catalyst of sustainable growth, through principled and expert property consulting

advice and action.

The Philippines’ deepest bench of

seasoned real estate advisors & brokers

ProjectLeasing

OccupierSolutions

IT-BPM SiteSelection

InvestmentSales

Our Services

Research &Consultancy

Occupier Solutions

Occupier Solutions transactions to date

Closed Deals Live Deals

82,000 SQM 333,000 SQM

Our Clients

IT-BPM SiteSelection Clients

Project Leasing

BGC. Citibank Plaza. Ecoprime. Menarco Tower. Net Park. Milestone at Fifth Avenue.

Orē Central. The Curve. Twenty-five Seven McKinley. W CityCenter. W Fifth Avenue. W Global Center. W Office at High Street. High Street South Corporate Plaza I

QUEZON CITY. Hexagon Corporate Center. One Luna Global Connections.

Panorama Technocenter.

ALABANG. Asian Star Building

MAKATI CITY. Frabelle Salcedo. Liberty Plaza. M1 Tower. MJ Corporate Plaza. Nex Tower.

ORTIGAS CENTER. St. Francis Square.

BAY AREA. DoubleDragon Plaza. Nexgen Tower.

CAVITE. Suntech iPark.

CEBU. Latitude Corporate Center. Mabuhay Tower.

We also advise and support landlords, building owners and real estate developers. Our leasing experts

create and implement strategies for finding the right tenant mix and ensure maximum occupancy in a

timely manner. Our real estate brokers have managed to lease more than thirty office buildings in Metro

Manila on behalf of developers.

Currently marketing 28 projectsTotal of 722,000 sqm

Looking to exclusively handle more project leasing appointmentsacross the Philippines in 2017

LPC looking to transact circa PhP 25 billion or USD 500 million in 2017

Investment Sales

LPC officially started October 1, 2015 and in the first year of operating, we have concluded the following:

PhP 3.5 billion or USD 70

million

✓ Prime Commercial Lots in Bonifacio Global City

✓ Office floor in Grade AAA building

along Ayala Avenue, Makati

✓ Prime Residential Apartment Building

in Salcedo Village, Makati

✓ Residential Apartment Buildings

in Kalayaan Avenue, Makati

✓ Office floors in Filinvest City

USD to PHP $1 : 50.04 PHP

55Source: Investment Sales pipeline as of January 2017

Research and Consultancy

Our research and consultancy arm allows us to offer to clients a full suite of consulting services

that include business planning, highest and best use studies, market research, project

conceptualization, and project feasibility.

Completed Projects – Highest and Best Use Study

Project Cost of PhP 58.1 billion

or USD 1,211 million

Central Business District:

BGC and Muntinlupa

Mixed Use developments:

Lakewood City Cabanatuan

Batulao, Woodlands Batangas

Pico de Loro, BatangasUSD to PHP $1 :48 PHP

CBRE Strategic Alliance with Leechiu Property Consultants

EFFECTIVE JANUARY 1, 2017Source: CBRE Website

This document is prepared by Leechiu Property Consultants (LPC) for information only and is based on information and representations provided to LPC. While reasonable care has been exercised in preparing this document, LPC does not warrant the accuracy or completeness of the information contained herein. LPC shall not be responsible for any losses or liability of any nature arising from or in connection with reliance, in whole or in part, on the contents of this document. Except as may otherwise be expressly indicated herein, LPC does not undertake any obligation to advise any recipient hereof of any changes or updates with respect to the information contained herein.

Interested parties should not rely on the statements or representations of fact as contained in this document, and are expected to conduct due diligence and independent verification of the information contained herein. Interested parties are encouraged to consult with their legal, financial, and tax advisers in evaluating the transaction described herein, as this document does not purport to be an exhaustive and/or definitive summary of all commercial, legal, and financial matters which may be material to your decision to proceed (or not to proceed) with the proposed transaction.

This document does not constitute, in whole or in part, an offer by LPC or contract between LPC and any recipient hereof.

Our Insights. Your Success.www.leechiu.com

INSIGHTS ON THE PHILIPPINE REAL ESTATE MARKET...PHILIPPINE GDP $292.45B Source: Trading Economics,...

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Transcript of INSIGHTS ON THE PHILIPPINE REAL ESTATE MARKET...PHILIPPINE GDP $292.45B Source: Trading Economics,...