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The Knowledge Report Philippine Real Estate Market Report - Q3 2011

Nov 11, 2011
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Q3 2011 | the knowledge

research & forecast report

pHILIppINE pROpERTY MARKET

Executive Summary
ecoNoMY
The philippine economy grew by 3.4% this quarter. A major contributor to the growth was consumer spending which increased by 9.9%, although capital formation through construction dropped by 4.9%. Despite the global economic uncertainties, the philippine economy is still expected to be resilient. Drivers to growth are continually drawn in the OFW remittances which grew by 6.3% in July to US$1.75 billion; and the BpO sector which is expected to gain US$11 billion in revenues by year-end.

offIce
Rental rates across all office classifications in the Makati CBD remain on an upward trend. Grade B rental rates rose the highest by almost 1% to an average of p470 per sq m monthly while Premium rental rates slightly rose to P840 per sq m a 0.7% gain. Grade A rental rates moved the least at 0.4% and remain stable in the p680 per sq m range. Followed by the strong demand for BPO office space, Grades A and B rental rates are still expected to pitch at a higher rate of 11% to p760 and p520 per sq m respectively by the third quarter of 2012.

Market INDIcators
offIce resIDeNtIaL retaIL

resIDeNtIaL
Across the major CBDs in Metro Manila, there are about 4,136 units delivered to date. Some 4,800 units are still expected by the end of the year of which 20% are in the Makati CBD. In the third quarter, luxury 3-bedroom rental rates in the Makati CBD have already reached the P600 per sq m level, much earlier than the previous forecast. As occupancy rates continue to improve, the significant increase in rents by over 8% QoQ indicates that landowners are confident of a positive turnout in the luxury residential market over the long term.

retaIL
The trend in the retail sector remains the same with the expansion plans of developers across the geographical level. projects by major mall developers such as Ayala Malls, SM prime and Robinsons continue to emerge in major cities and provinces namely General Santos, Davao, Cebu, Bacolod, Palawan, Cavite and Pampanga. Apart from the upcoming large-scale mall developments, district to neighbourhood retail centres are also expected to increase in the long term in line with robust growth in the business processing sector and the residential market.

www.colliers.com

PhIlIPPIneS | 3Q 2011 | THE KNOWLEDGE ECONOMIC INDICATORS
2007
Gross National Product Gross Domestic Product Personal Consumption Expenditure Government Expenditure Investments Exports Imports Agriculture Industry Services Inflation (full-year) Budget Deficit (Billion Pesos) P: US$ (Average) Average 91-Day T-Bill Rates
7.8% 7.3% 6.0% 10.0% 9.3% 3.1% -5.4% 5.1% 6.6% 8.7% 2.8% p12.4 p46.1 3.4%

2008
6.2% 3.8% 4.7% 3.2% 1.7% -1.9% 2.4% 3.2% 5.0% 3.3% 9.3% p68.1 p44.7 5.2%

2009
3.0% 0.9% 3.8% 8.5% -9.9% -14.2% -5.8% 0.1% -2.0% 3.2% 3.2% p270 p47.6 4.0%

1Q 2010
9.50% 7.30% 5.90% 18.50% 24.30% 17.90% 20.30% -2.50% 15.70% 6.10% 4.40% p132 p45.2 4.30%

2Q 2010
7.90% 7.90% 4.90% 5.60% 11.00% 27.40% 23.90% -3.00% 15.80% 6.40% 3.90% p62 p45.3 3.90%

3Q 2010
7.50% 6.50% 4.20% -6.10% 15.60% 28.00% 16.00% -2.50% 9.20% 7.70% 3.80% p63 p45.9 4.00%

4Q 2010
6.70% 7.10% 7.60% -7.60% 22.80% 21.10% 21.80% 4.10% 6.50% 6.40% 2.90% p10 p43.7 2.60%

1Q2011
3.60% 4.90% 4.90% -17.20% 37.60% 3.30% 8.80% 4.20% 7.20% 3.70% 4.30% p26 p43.5 1.16%

2Q 2011
1.90% 3.40% 9.90% 9.20% 12.80% -0.60% 8.00% 7.10% -0.60% 9.40% 4.30% p8.9 p42.57 1.45%

Source: National Statistical Coordination Board

ecoNoMY
The Philippine economy grew by 3.4% in the second quarter but consequently dropped from the 4.9% recorded in the first quarter of this year. Consumer spending, which grew by 9.9%, remained as the major contributor. However, fixed capital formation, particularly construction, dropped by 10.7% due to low public spending on infrastructure, despite a 19% increase in private investments. Due to a weaker economic outlook, sluggish exports and low government spending, projections for the Philippine GDP by most multilateral institutions were cut from over 5.0% to 4.0 - 4.7% this year. Despite this, the country is still expected to be resilient as regards the probable adverse effects of global financial uncertainties. OFW remittances were up by 6.3% in July to US$1.75 billion and the external demand for workers remains high. The latest government data shows that the number of processed job orders increased by 19.5% in August and is expected to meet requirements mainly in Saudi Arabia, UAE, Taiwan, Qatar, Kuwait and Hong Kong. Furthermore, gains on the business process outsourcing (BPO) are projected to increase by around 20% to US$11 billion this year. Currently, BPO revenues gained more than US$657 million in the second quarter. From a fiscal standpoint, the country is in a strong financial space with about P9.20 billion in surplus while the inflation rate remained manageable at an average of 4.5% in the third quarter. Consequently, this drove long-term interest rates on loans to 5.4% on average.

OFW Remittances
20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 -

In Million US Dollars

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

1Q

2Q

3Q

4Q

Source: Bangko Sentral ng Pilipinas * As of July 2011

2011

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PhIlIPPIneS | 3Q 2011 | THE KNOWLEDGE

LaND VaLUes
Implied land values in Makati CBD increased by almost 2% this quarter and are currently pegged at P274,141 per sq m. This translates to P17,134 price per developable area. Ortigas Center land values appreciated minimally at a discounted rate to Makati of almost 1% to P126,350 per sq m. Land values grew highest in Fort Bonifacio to an average of p177,500 per sq m due to the consistently high interest in the location and despite the lack of available principal lots.

Makati CBD, Ortigas & Fort Bonifacio Average Land Values
400,000
pesos per square meter

300,000 200,000 100,000 -

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12F

Makati CBD

Ortigas Ctr

BGC

Source: Colliers International Philippines Research

COMPARATIVE LAND VALUES PESOS / SQ M MAKATI CBD ORTIGAS CENTER FORT BONIFACIO 3Q11 262,551 - 285,731 94,574 - 158,126 145,000 - 210,000 2Q11 257,125 - 280,731 93,747 - 156,590 135 540 - 186,450 % chaNGe (QoQ) 1.90% 0.90% 10.3% 3Q12f 274,162 - 298,207 99,399 - 166,032 149,350 - 232,391 % chaNGe (YoY) 4.40% 5.00% 12.00%

LIceNses to seLL
As of August of this year, HLURB data shows that total residential Licenses-to-Sell (LTS) contracted to 110,056 units or a drop of 12% from the same period a year ago. To date, the average number of residential LTS issued grew by 13,750 units MoM. The figures are expected to build as the number of new launches grew by over 90 residential buildings as of the third quarter of this year. The number of licenses continues to drop across all segments except the high-rise residential which grew by 24% to a total of 37,384 units. Recent issuances include the Venice Luxury Residences (1,172 units) by Megaworld, Grand Riviera Suites (1,014 units) by Moldex, and the projects of SMDC namely Blue Residences (1,591 units), Mezza 2 Residences (1,344 units) and MPlace @ Ortigas (1,172 units). As of August, the average YoY growth of approved licenses stood at 44% in the same segment. Consistently on a downward trend are the licenses issued across the socialized and economic segments, which both fell by an average of 30% in August as compared to the same period last year. In the mid-income segment, YoY growth posted a 14% decrease but grew significantly by 50% on a monthly basis reaching 21,954 units.

3Q12F

Source: Colliers International Philippines Research

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PhIlIPPIneS | 3Q 2011 | THE KNOWLEDGE
HLURB LICENSE TO SELL UNITS
Socialised Housing Low-Cost Housing Mid-Income Housing High-Rise Residential Commercial Condominium Farm Lot Memorial Park Industrial Subdivision Commercial Subdivision

Jan-Aug 2011 22,103 28,615 21,954 37,384 605 225 60 30 473 111,449

Jan-Aug 2010 32,841 40,413 25,742 25,946 1,912 283 172 175 127,484

% CHANGE YOY -32.7% -29.2% -14.7% 44.1% -68.4% -20.5% -65.1% 170.3% -12.6%

Total (Philippines)

Source: Housing and Land Use Regulatory Board

HLURB Licenses
160,000 140,000 120,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 -

units

80,000 60,000 40,000 20,000
1Q99 4Q99 3Q00 2Q01 1Q02 4Q02 3Q03 2Q04 1Q05 4Q05 3Q06 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11

-

Quarterly Approvals

Moving 12-Month Average (RHS)

Source: Housing and Land Use Regulatory Board

offIce sector
Supply The commercial industry continues to project a positive outlook in the Philippines with the O&O sector driving robust growth of office space across the major cities. According to the Business process Association of the philippines Road Map 2011 - 2016 the BpO sector has the potential to post about US$20 billion in revenues which represents around a million employees in the next five years. This translates to roughly four to five million square metres of potential new office space. Currently, developers remain optimistic about the turnout of the property market which has heightened the number of office projects in the pipeline. From this year to the end of 2013, about a million square metres of new office space is intended to be completed in Metro Manila alone, while across the country, office-campus type of developments are seen to increase. A total of about 175,000 sq m of net usable area were delivered to date with almost 50% more expected towards year-end. Some of the recently completed buildings include Kingston Tower (5,100 sq m) and Vector 2 (13,800 sq m) in Alabang, and iSquare (12,400 sq m) in Ortigas. In the Makati CBD, the Zuellig Tower, which is mainly intended for MNCs and CHQs, nears its completion with some 57,000 sq m of additional space in the first quarter of 2012. However, supply will remain constricted throughout next year as office development will remain muted until the completion of Alphaland Makati Tower (38,000 square meters) in 2013.

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units
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100,000

PhIlIPPIneS | 3Q 2011 | OFFICE

Makati CBD vs. Metro Manila Office Stock

7,000,000 6,000,000 5,000,000
in sq.m.

600,000 500,000 400,000 300,000 200,000 100,000 0
in sq.m.

4,000,000 3,000,000 2,000,000 1,000,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F
Metro Manila Stock Makati CBD YoY Change (RHS)

-

Source: Colliers International Philippines Research

offIce sector
Demand The Makati CBD continues to show high demand despite the narrowed options of available office space. Overall vacancy returned to the 3% level after it rose to more than 4% during the previous quarter. Vacancy rates continue to improve in both the Premium and Grade A buildings with 1.90% and 4.66% respectively. This was mainly driven by high take-up rates manifested in Petron Megaplaza (3,800 sq m), Equitable Tower (2,000 sq m), Pacific Star (1,900 sq m) and Enterprise Center (1,500 sq m). On the other hand, vacancy rates across Grade B buildings remain stable at the 3% level. Take-up rate is expected to reach to about 50,000 sq m in Makati this year since both traditional and BPO offices remain consistently the most preferred in this business location. Thus, the outlook on vacancy rates is expected to be stable at 2% - 3% even after the next twelve months.

Makati CBD Office Supply and Demand
270,000 220,000 170,000
in sq.m.

20%

15%

120,000 70,000 20,000 (30,000) (80,000)

10%

5%

0%

2011F

New Supply During Year

Take-Up During Year

Vacancy at Year End (RHS)

Source: Colliers International Philippines Research

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2012F

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

-5%

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PhIlIPPIneS | 3Q 2011 | OFFICE

MAKATI CBD COMPARATIVE OFFICE VACANCY RATES 3Q11 pREMIUM GRADE A GRADE B & BELOW ALL GRADES 1.90% 4.66% 3.93% 3.84% 2Q11 3.17% 6.17% 3.69% 4.15% 3.34% 3Q12F

Source: Colliers International Philippines Research

FORECAST OFFICE NEW SUPPLY LOCATION MAKATI CBD ORTIGAS FORT BONIFACIO EASTWOOD ALABANG OTHER LOCATIONS* TOTAL End-2010 2,699,696 1,126,018 485,693 252,979 234,305 685,362 5,484,053 19,332 146,289 75,605 32,824 81,007 355,057 64,600 385,154 2011 2012 90,000 40,416 190,138 2013 115,082 5,720 302,305 33,560 23,000 479,667

Source: Colliers International Philippines Research *Manila, Pasay, Mandaluyong, and Quezon City

Rents Rental rates across all office classifications in the Makati CBD remain on an upward trend although with a minimal rate of increase compared to the previous quarter. Grade B rental rates rose the highest by almost 1% to an average of P470 per sq m monthly while Premium rental rates slightly pitched to P840 per sq m, at 0.7% - half the increase it reached during the last quarter. Grade A rental rates moved the least at 0.4% and remained generally stable at the p680 per sq m range over the last three quarters. The outlook is that Premium rental rates will increase at 3.6% to P920 per sq m over the next twelve months and are projected to breach the 2008 level of more than P1,000 per sq m in the course of two to three years. Followed by the strong demand for BPO office space, Grade A and B rental rates are still expected to peak at a higher rate of 11% to P760 and P520 per sq m respectively by the third quarter of 2012.

COMPARATIVE OFFICE RENTAL RATES MAKATI CBD (BASED ON NET USEABLE AREA) PESOS / SQ M / MONTH pREMIUM GRADE A GRADE B 3Q11 776 - 905 488 - 881 438 - 500 2Q11 770 - 900 475 - 889 435 - 495 % CHANGE (QOQ) 0.7% 0.4% 0.9% 3Q12F 812 - 928 528 - 976 503 - 541 % CHANGE (YOY) 3.6% 11.3% 11.4%

Source: Colliers International Philippines Research

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PhIlIPPIneS |

3Q 2011 | OFFICE

NOTABLE LEASING DEALS Building MDC 100 Petron Megaplaza Sun Life Center Area Eastwood Makati Fort Bonifacio Size (sq m) 17,215.95 7,545.00 3,343.00

Source: Colliers International Philippines Research

Makati CBD Office Capital Values
Capital Values In the third quarter of this year, average capital values for premium buildings slightly increased at 0.5% to 105,100 per sq m while Grade B buildings escalated to P54,500 per sq m. Over the last two quarters, Grade A capital values have been stable in the p80,000 per sq m range. By the third quarter of next year, capital values are projected to appreciate by 9.9% for premium buildings, 8.3% for Grade A and 2.7% for Grade B.
130,000 120,000 110,000
in peso per sq.m.

100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000
2Q11F 1Q12F 1Q00 4Q00 3Q01 2Q02 1Q03 4Q03 3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10

Premium

Grade A

Grade B/B-

Source: Colliers International Philippines Research

COMPARATIVE OFFICE CAPITAL VALUES MAKATI CBD (BASED ON NET USEABLE AREA)
PESOS / SQ M pREMIUM GRADE A GRADE B 3Q11 96,734 - 113,557 68,696 - 91,942 46,500 - 62,500 2Q11 96,657 - 112,655 68,151 - 91,869 46,000 - 62,100 % CHANGE (QOQ) 0.5% 0.4% 0.8% 3Q12F 107,297 - 123,755 73,775 - 100,248 47,768 - 64,182 % CHANGE (YOY) 9.9% 8.3% 2.7%

Source: Colliers International Philippines Research

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PhIlIPPIneS | 3Q 2011 | RESIDENTIAL
RESIDENTIAL SECTOR
Supply The Philippine housing backlog stood at 3.7 million last year with the shortage coming mainly from the socialised or affordable housing segments. Initiatives have been made by the major players such as Ayala Land and Filinvest Land, together with the public sector, to answer the housing needs. However, the majority of developers are still geared towards the mid- to high-cost residential segments. Across the country, the total number of issued licenses by HLURB for the high-rise segment increased by 44% in the first eight months of this year to 37,384 units. In Metro Manila, the number of project launches continues to surge with over 90 residential buildings, translating to more than 25,000 units as of this quarter. From the major CBDs there were about 4,136 units delivered to date. Some of these are the recently completed buildings such as The Columns at Legaspi Tower 2 (443 units) in Makati, and F1 Global City Center (234 units) in Fort Bonifacio. Next quarter, more than 4,800 units are still targeted for completion. Twenty percent of these are in the Makati CBD with four more projects underway, one of which is the upcoming premium residential condominium, Raffles Residences.

Makati CBD Residential Stock
18,000 16,000 14,000 12,000
in units

25% 20% 15% 10% 5% 0% -5%

10,000 8,000 6,000 4,000 2,000
1Q99 4Q99 3Q00 2Q01 1Q02 4Q02 3Q03 2Q04 1Q05 4Q05 3Q06 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11 4Q11F 3Q12F

-

Residential Stock

YoY Change (RHS)

Source: Colliers International Philippines Research

FORECAST
RESIDENTIAL NEW SUppLY LOCATION MAKATI CBD ROCKWELL FORT BONIFACIO ORTIGAS EASTWOOD TOTAL (cumulative) 2010 13,076 2,382 10,709 7,481 5,735 39,383 2011 2,181 1,336 3,052 2,389 8,958 2012 1,961 2,417 934 558 5,870 2013 2,105 2,621 2,092 977 7,795 TOTAL 19,323 3,718 18,799 12,896 7,270 62,006

Source: Colliers International Philippines Research Demand Vacancy rates in the Makati CBD increased minimally to 10.4% this quarter driven by the rise in vacancies across Grade A and B residential buildings from 9.9% to 11.0%. On the other hand, vacancies across luxury residential units marginally decreased by 0.5% but retained on the 6% level. Vacancies in Makati are expected to continually increase to as high as 12% mainly due to the significant amount of upcoming supply over the next twelve months.

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PhIlIPPIneS | 3Q 2011 | RESIDENTIAL Makati CBD Residential Vacancy
18% 16% 14% 12% 10% 8% 6% 4%
1Q98 4Q98 3Q99 2Q00 1Q01 4Q01 3Q02 2Q03 1Q04 4Q04 3Q05 2Q06 1Q07 4Q07 3Q08 2Q09 1Q10 4Q10 3Q11
1Q12F

Source: Colliers International Philippines Research

MAKATI CBD COMPARATIVE RESIDENTIAL VACANCY RATES
3Q11 LUXURY OTHERS ALL GRADES 6.2% 11.0% 10.4% 2Q11 6.7% 9.9% 9.5% 12.4% 3Q12F

Source: Colliers International Philippines Research Rents In the third quarter, luxury 3-bedroom rental rates in the Makati CBD have already reached the P600 per sq m level, much earlier than previously forecast. As occupancy rates continue to improve, the significant increase in rents by over 8% QoQ indicates that landowners are confident of a positive turnout in the luxury residential market over the long term. Currently, the average rental rate for a 290-sq m unit is P178,000 per month.

Makati CBD, Rockwell, Bonifacio Global City prime 3BR Units Residential Rents
900 800
in peso per sq.m. per month

700 600 500 400 300 200 100
1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 3Q12F

-

Makati CBD

Rockwell

Bonifacio Global City

Source: Colliers International Philippines Research

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2Q12F

2%

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PhIlIPPIneS | 3Q 2011 | RESIDENTIAL

METRO MANILA RESIDENTIAL CONDOMINIUM COMPARATIVE LUXURY 3BR RENTAL RATES
PESOS / SQ M / MONTH MAKATI CBD ROCKWELL BONIFACIO GLOBAL CITTY 3Q11 397 - 835 650 - 853 537 - 755 2Q11 369 - 768 645 - 840 540 - 765 % CHANGE (QOQ) 8.3% 1.2% 0.2% 3Q12F 443 - 846 682 - 894 562 - 804 % CHANGE (YOY) 2.2% 4.9% 5.8%

Source: Colliers International Philippines Research

In Rockwell Center, luxury 3-bedroom rental rates rose by over 1% to an average of P750 per sq m per month. Despite vacancy rates increasing over 3% this quarter, rents may still pitch by 5% over the next twelve months as the take-up rate remains consistently the highest in Rockwell among the CBDs. On the other hand, Fort Bonifacio rental rates remain steady at an average of P650 per sq m per month and are expected to increase by over 5.8% towards the third quarter of next year.

COMPARATIVE RESIDENTIAL LEASE RATES THREE-BEDROOM pREMIUM, SEMI-FURNISHED
MINIMUM Apartment Ridge / Roxas Triangle Rental Range Average Size Salcedo Village Rental Range Average Size Legaspi Village Rental Range Average Size Rockwell Rental Range Average Size Fort Bonifacio Rental Range Average Size 90,000 130 185,000 250 215,000 300 120,000 180 154,000 250 230,000 330 55,000 170 150,000 120 200,000 230 55,000 170 75,000 190 135,000 320 70,000 230 170,500 270 250,000 350 AVERAGE MAXIMUM

Source: Colliers International Philippines Research

Capital Values Average capital values in both the Makati CBD and Fort Bonifaco are virtually the same at P107,100 per sq m. However, expectations on the secondary market prices in the Makati CBD may exceed Fort Bonifacio while the former increases by about 5% to P112,700 sq m in the next twelve months. In Rockwell Center, average capital values rose by 2.6% to almost P112,000 per sq m driven by the recently completed One Rockwell West. A 3% increase is further expected towards the end of the year following the turnover of One Rockwell East.

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PhIlIPPIneS | 3Q 2011 | RESIDENTIAL

Makati CBD Residential Capital Values
120,000 110,000
in peso per sq.m.

100,000 90,000 80,000 70,000 60,000

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11F

Makati CBD

Rockwell

Bonifacio Global City

Source: Colliers International Philippines Research

METRO MANILA RESIDENTIAL CONDOMINIUM COMPARATIVE LUXURY 3BR CAPITAL VALUES
PESOS / SQ M MAKATI CBD ROCKWELL BONIFACIO GLOBAL CITY 3Q11 73,638 - 140,699 98,440 - 131,074 55,154 - 125,724 2Q11 71,621 - 140,512 92,956 - 125,337 87,889 - 123,866 % CHANGE (QOQ) 1.0% 5.1% 1.2% 3Q12F 76,626 - 148,877 95,586 - 137,343 90,296 - 131,473 % CHANGE (YOY) 5.2% 1.5% 3.5%

Source: Colliers International Philippines Research

RETAIL
Supply Metro Manila retail stock is unchanged at over 5 million sq m in the past three quarters. However, an additional supply of more than 170,000 sq m (GLA) is expected in the next six months following the completion of Lucky China Town Mall in Manila, BHS East Block in Fort Bonifacio and Two Shopping Center in Pasay. Trends in the retail sector remain the same with the expansion plans of developers across the geographical level. projects by major mall developers such as Ayala Malls, SM Prime and Robinsons continue to emerge in major cities and provinces namely General Santos, Davao, Cebu, Bacolod, Palawan, Cavite and Pampanga, while in China, a fourth SM mall, SM City Suzhou, is slated for completion by year-end In Metro Manila, SM continues to scale up its retail foothold with new, upcoming malls in Sucat and Novaliches and the expansion of SM Megamall in Ortigas. Ayala has recently broken ground for its latest commercial development, Fairview Terraces, in Quezon City while projects of Megaworld such as The Venice Phase 2 and the Uptown Mall are expected to build more retail space in Fort Bonfacio. Apart from the upcoming large-scale mall developments, district to neighbourhood retail centres are also expected to increase in the long term. partnerships between property and retail investors are expected to strengthen in the next few years as the demand for small- to medium-scale retail spaces makes a key component across the growing business process sector and residential market. Demand Vacancy rates, in both super-regional and regional malls across Metro Manila, decreased by 0.25% this quarter with occupancy level remaining high at 99%. Vacancy rates in super-regional malls increased by .41% with an average vacant space of around 1,500 sq m. Regional malls on the other hand were generally stable decreasing by just .05% from the former 1.35%. This renders an average vacant space of 900 sq m. Consumer spending, which improved by 9.9% during the first half of this year, may continually drive mall occupancies to a long-term high.

1Q12F

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PhIlIPPIneS | 3Q 2011 | RETAIL

METRO MANILA RETAIL VACANCY 3Q11 SUPER-REGIONAL REGIONAL 1.05% 1.30% 2Q11 0.64% 1.35%

Source: Colliers International Philippines Research

RETAIL STOCK METRO MANILA
SQ M SUPER-REGIONAL REGIONAL DISTRICT / NEIGHBOURHOOD ALL LEVELS 3Q11 2,943,353 1,115,378 1,045,540 5,104,271 2Q11 2,943,353 1,065,378 1,045,540 5,054,271 % CHANGE (QOQ) 0.00% 4.69% 0.00% 0.99% 3Q12F 3,051,353 1,115,378 1,055,734 5,222,465 % CHANGE (YOY) 3.67% 0.00% 0.97% 2.32%

Source: Colliers International Philippines Research

Rents Ayala Center rental rates increased by 2.6% this quarter with an average of P1,218 per sq m. In Ortigas, rents improved marginally to P1,069 per sq m. With the improvements in consumer confidence from -24.2% in the previous quarter to the current -18.7%, buying intentions are expected to build up primarily in food & beverage and durable goods. This may cause rental rates to jump by 2% - 3% in the next twelve months.

PESOS / SQ M / MONTH
AYALA CENTER ORTIGAS

COMPARATIVE EFFECTIVE RETAIL RENTS 3Q11 2Q11 % chaNGe (QoQ)
1,220 1,070 1,218 1,069 0.2% 0.1%

3Q12f
1,240 1,090

% chaNGe (YoY)
1.6% 1.9%

Source: Colliers International Philippines Research

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PhIlIPPIneS | 3Q 2011 | RETAIL

Makati CBD Retail Rent

1,350

8% 7% 6% 5% 4% 3% 2% 1% 0%

in peso per sq.m. per month

1,250 1,150 1,050 950 850 750 650 550

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11F

1Q12F

2Q12F

(Makati) Monthly Rent

(Makati) YoY Increase (RHS)

Source: Colliers International Philippines Research

Ortigas Center Retail Rent
1,150 1,050 950 850 750 650
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11F 1Q12F 2Q12F 3Q12F

3Q12F

in peso per sq.m. per month

4% 4% 3% 3% 2% 2% 1% 1% 0%

550

(Ortigas) Monthly Rent

(Ortigas) YoY Increase (RHS)

Source: Colliers International Philippines Research

p. 13

| coLLIers INterNatIoNaL

PhIlIPPIneS | 3Q 2011 | AUTOMOTIVE

Spending Indicators The latest data from the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) shows that the total vehicles sold as of August this year reached at 93,108 units which is 4.1% lower than the sales reported from a year ago. However, on a monthly basis it grew by 0.1% from July's 11,550 units. Total passenger cars sold was at 4,026 units which grew by 6% MoM, however, the number of commercial vehicles sold continued to contract by 3% to 7,532 units. In spite of that, supply may have improved in the recent months. The disruption caused by the disaster in Japan continues to weaken the distribution of some models resulting in the marginal drop in the sales take-up.

512 offices in 61 countries on 6 continents
United States: Canada: Latin America: Asia Pacific: EMEA: 125 38 18 214 117

· $1.5 billion in annual revenue in 2010 · 979 million square feet under management

Quarterly Vehicle Sales
50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11

· Over 12,500 professionals

40% 30% 20% 10% 0% -10% -20%

10F Tower 2 RCBC Plaza Ayala Avenue, Makati City philippines TEL +632 888 9988 FAX +632 845 2312 www.colliers.com

coLLIers INterNatIoNaL phILIppINes

karlo pobre

Car Sales

YoY Change (RHS)

Research Analyst Consultancy and Valuation Services Main +632 888 9988 ext.4030 Fax +632 845 2612 Email Karlo.Pobre@colliers.com

Source: Chamber of Automotive Manufacturers of the Philippines

paul Vincent chua

Associate Director Consultancy and Valuation Services Main +632 888 9988 ext.4024 Fax +632 845 2612 Email paul.chua@colliers.com

David a. Young

Managing Director, philippines Main +632 888 9988 FAX +632 845 2312 Email David.a.Young@colliers.com
Copyright © 2011 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.

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