Philippines Real Estate Report Q2 2012
Business Monitor International, February 2012, Pages: 68
The Philippines real estate sector is generally considered to have outperformed in 2011. Almost 300,000 square metres (m2) of Grade A office space came to market across Metro Manila. The booming offshoring and outsourcing industry boosted office rents, while positive investor sentiment buoyed capital values. Remittances continued to provide local Filipinos with the spending power to drive the retail market, which saw the entry of new local and international retailers, such as Emporio Armani, LeSportSac, Paris Hilton Bags, HTC and Jamba Juice, enhancing the demand for retail space. Despite the weak global economy constraining demand for Philippine exports, the local economy is fundamentally stable, though underperforming. While little can be done to prevent the exogenous factors affecting the Philippines, it may be said that the government could have done better in 2011. Weak government and private spending was little offset by resilient private consumption. Public spending targets were missed throughout the year, with Philippine President Benigno Aquino III’s US$1.7bn stimulus package in Q411 having a relatively mute effect on the quarter’s GDP growth. Private sector participation has also been hampered by Manila’s inability to enact coherent investment policies, emblematic of which has been the government’s highly touted Private-Public Partnership programme, under which not one project made it into fruition in 2011. Private consumption, which comprises 70% of total GDP, slowed from Q2 to Q3 but still posted year-on-year (y-o-y) growth of 7.1% for the quarter. Overseas remittances play a large role in household expenditure and managed to keep private consumption buoyant amid the weakening wider economy. However, this is not expected to continue as BMI forecasts that private consumption will be limited to 4.3% in 2012 following a 5.8% performance in 2011.
A recent pledge by the Philippine government to boost infrastructure spending in 2012, as well as improve monetary conditions, suggests that a recovery in construction activity is on the cards. As a result, we are revising up our forecasts for the Philippine construction sector, with real growth expected to reach 6.5% in 2012 (from 5.7%). Beyond 2012, we believe that construction activity in the Philippines could improve further, with real growth for the sector forecast to average 7.5% per annum between 2013 and 2016.
Some of the key opportunities in the real estate market are:
- The Philippines is one of the fastest-urbanising countries in East Asia. With an English-speaking and relatively low-cost workforce, it is ideally placed to participate in high-demand services such as business process outsourcing.
- Many residents of cities in the Philippines continue to experience poverty, environmental degradation and live in slums or other inadequate housing arrangements. Economic development has created rural-to-urban migration. Some key risks to the real estate market are:
- Political unrest in the Middle East and North Africa causing a decline in overseas remittances.
- Economic difficulties in the US and eurozone, and commodity price fluctuations, pose risks to private consumption growth.
- Despite President Benigno Aquino III’s pro-foreign direct investment (FDI) policies, the changes in the law affecting REITs mean developers that had planned to set trusts up have stopped. In August 2011, mall developer SM Prime Holdings dropped its plans to raise US$500mn via a REIT and Ayala Land dropped its plans to raise US$400mn following the tax rises by the BIR and the tax agency.
Executive Summary
SWOT Analysis
Philippines Real Estate And Construction SWOT
Philippines Political SWOT
Philippines Economic SWOT
Philippines Business Environment SWOT
Real Estate Market Overview
Economy
Real Estate
REITs
Retail
Construction
Manila
Makati City
Cebu City
Real Estate Market Analysis – Office
Supply And Demand
Rents And Yields
Table: Historic Office Rents, 2010-2011 (PHP per m2/month)
Table: Net Office Yields, 2010-2012
Table: Terms of Rental Contract/Lease, Mid 2011
Industry Forecast Scenario
Table: Forecast Office Rents, 2012 (PHP per m2/month)
Table: Forecast Net Office Yields, 2008-2016
Real Estate Market Analysis – Retail
Supply And Demand
Rents And Yields
Table: Historic Retail Rents, 2010-2011 (PHP per m2/month)
Table: Net Retail Yields, 2010-2012
Table: Terms of Rental Contract/Lease, Mid 2011
Industry Forecast Scenario
Table: Forecast Retail Rents, 2012 (PHP per m2/month)
Table: Forecast Net Retail Yields, 2008-2016
Real Estate Market Analysis – Industrial
Supply And Demand
Rents And Yields
Table: Historic Industrial Rents, 2010-2011 (PHP per m2/month)
Table: Net Industrial Yields, 2010-2012
Table: Terms of Rental Contract/Lease, Mid 2011
Industry Forecast Scenario
Table: Forecast Industrial Rents, 2012 (PHP per m2/month)
Table: Forecast Net Yield, 2008-2016
Construction Industry Outlook
Table: Philippines Construction And Infrastructure Industry Data And Forecasts, 2008-2016
Table: Philippines Construction And Infrastructure Industry Long-Term Forecasts, 2013-2021
Construction And Infrastructure Forecast Scenario
Macroeconomic Outlook
Table: Philippines - Economic Activity, 2011-2016
Business Environment
Real Estate/Construction Business Environment Ratings
Table: Asia Real Estate/Construction Environment Ratings
Philippines’ Business Environment
Table: BMI Business And Operation Risk Ratings
Institutions
Table: BMI Legal Framework Rating
Infrastructure
Table: Labour Force Quality
Market Orientation
Table: Asia, Annual FDI Inflows
Table: Trade And Investment Ratings
Table: Top Export Destinations, 2002-2009 (US$mn)
Operational Risk
Competitive Landscape
Company Profiles
Ayala Land
EEI Corporation
Filinvest Land Incorporated
First Philippine Balfour Beatty
Megaworld Corporation
Robinsons Land Corporation
SM Prime Holdings
Vista Land & Lifescapes Incorporation
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
Real Estate/Construction Business Environment Rating
Table: Weighting Of Indicators
Sources
- Ayala Land
- EEI Corporation
- Filinvest Land Incorporated
- First Philippine Balfour Beatty
- Megaworld Corporation
- Robinsons Land Corporation
- SM Prime Holdings
- Vista Land & Lifescapes Incorporation
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