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JLL Reveals PH Philippine Property Market Will Remain Vigorous for the second half of 2019

August 5, 2019

JLL’s thorough research and expert analysis includes the 2ndQ 2019 Metro Manila and Davao property markets.  And based on JLL’s comprehensive study, the state of the Philippine real estate industry remains dynamic- and poised to attract more investments in the ensuing months.   METRO MANILA PROPERTY MARKET OVERVIEW (2Q19)   OFFICE PROPERTY MARKET  SUPPLY An estimate of 156,100 square meters of office space was added to the total stock owing to the completion of eight (8) buildings, bringing in the aggregate supply added for 2019 to 336,700 square meters of office space. Development completions in 2Q19 are spread in several locations across the districts of Metro Manila within the Cities of Makati, Muntinlupa, Paranaque, Pasay, Quezon and Taguig. The biggest of this development is MWM Terminal Inc.’s PITX Tower 4 in Paranaque City, which spans 19,200 square meter. This is followed by Double Dragon Center West with 17,600 square meters; 100 West Building in Filinvest Makati with 14,300 square meters and SM City Fairview Tower 1 with 12,600 square meters. As of 2Q19, total supply of office spaces from Grade B to A developments approximately totals to 8.1 million square meters of office space with the majority located in Taguig City followed by Makati City backed by the presence of established CBDs – Makati and Bonfiacio Global  City (BGC). The high demand and concentration of office developments has spilled to its fringe areas with the presence of Mckinley Hill and Mckinley West in Taguig City and office developments rising along Chino Roces Avenue and other townships. DEMAND               Metro Manila maintained a manageable vacancy level at 6% amid continuous additional office spaces from development completions. Taguig City holds majority of the office spaces untenanted as majority of the recent development completions are in BGC. Coming in second is Makati City, followed by Quezon City. Offshoring and Outsourcing (O&O) remain as the major demand driver, taking-up approximately 128,100 square meters of office space in 2Q19. For the whole of 1H19, around 181,000 square meters of office space was absorbed by O&O firms. However, there has been a slow q-o-q take-up of office spaces from O&O firms in Metro Manila as they have expanded more in the provinces, owing to the limited PEZA approvals for IT centers especially in Metro Manila. In 2Q19, only two buildings were granted PEZA accreditation with one located in Taguig City and the other in Iloilo City. Moreover, the government’s Administrative Order No. 18 for 2019 imposes prohibition of reviewing and granting PEZA applications for properties located in Metro Manila to allow the creation of more special economic zones in the provinces.  Online Gaming remains the second top office space occupier in the whole of 1H19 leasing a total of 160,000 square meters of office space in Metro Manila with around 119,200 square meters of office space transacted in 2Q19. For the said quarter, a POGO leased a whole building in Quezon City with a Gross Leasable Area (GLA) of 10,400 square meters and also leased significant amount of office spaces in two buildings within Paranaque City. As of June 2019, 56 POGOs have been registered with PAGCOR. Pharmaceutical companies came as a surprise as a major demand driver to leased office spaces in 1H19, taking up an estimate of 45,100 square meters mainly due to their expansions within Metro Manila. Fourth top office space occupier for 1H19 are flexible workspace operators leasing 14,400 square meters of office space in Metro Manila. Major foreign and local operators remain to be aggressive in their expansion plans and are seeking to increase footprint both in CBD areas and secondary business hubs. In 2Q19, WeWork opened its second facility in the country at RCBC Plaza in Makati CBD. RENTS            Makati City remains to have the highest quoted rent mainly due to the presence of Prime Office buildings within Makati CBD. Limited available office supply in Makati CBD, robust demand, and presence of prime office buildings pushed landlords to command higher rents. Next would be Taguig City due to robust space demand in BGC with up-to-date building facilities. On the other hand, buoyant occupancy from online gaming in the Bay Area pushed rental rates further.             Meanwhile, asking rents of developments to complete from 2H19-2022E are close to the range of rents of existing developments with Taguig City leading the higher end of the spectrum due to more construction of Grade A developments in BGC. Buildings that are registered with USA’s LEED (Leadership in Energy and Environmental Design) or the Philippine Green Building Council’s BERDE certifications have been influencing the increase in value of rents due to quality technology and equipment used for buildings to be environmentally sustainable in the long run.   RESIDENTIAL CONDOMINIUM PROPERTY MARKET SUPPLY More than 2,000 units are completed in 2Q19, mostly coming from Makati City and Taguig City. The latter half of the year is expected to deliver around 35,500 units more, recording a peak, should there be no construction delays. Makati City and Quezon City house majority of both existing and future condominium supply. Growth is noticeable in Pasay City in the next three years due to the uptick of investments in Bay City. SM Prime Holdings, Inc. holds majority of both existing and future supply, on the back of being the lead contributor in various cities, particularly Pasay City where more than 90% of the pipeline belongs to the developer. DEMAND Average vacancy rate in Metro Manila is recorded at 2%, with Pasay City and Paranaque City pulling down the rate due to online gaming tenants, while employees and students drive the leasing activities for Makati City and Quezon City. A solid preselling market in Metro Manila is observed, evident from high sales take-up figures of future developments. Paranaque City is lagging behind other districts, primarily due to a large number of available units in a development located in the city’s outskirts. Another demand driver comes from the leasing market. The leasing market for upper-mid to luxury developments source demand from corporate housing needs of expatriate employees of O&O firms, MNCs, and embassies. Additionally, local and foreign high-net worth investors continue to drive the sales market for upper-mid to luxury developments – with the purpose of either renting out the units or flipping them upon capital appreciation. Meanwhile, individuals that make up starting families, young professionals, and upgraders make up the end-user demand profile of mostly mid-range developments.   RENTS AND SELLING PRICES The strong leasing market, driven by expatriate employees, stimulated rents in Makati City and Taguig City, becoming the highest across districts. On the other hand, rents in Pasay City and Parañaque City are influenced by healthy demand from online gaming employees. As far as selling prices go, Makati City commands the highest prices for both existing and future supply, while prices in Paranaque City have continuously gone up, evidenced by the prices of future supply, due to the large interest in Bay City.   RETAIL PROPERTY MARKET SUPPLY               Total existing stock as of 2Q19 stood at 6.5M square meters. Quezon City leads all markets with a share of 27%, followed by Manila City and Pasay City with 13% and 11%, respectively. Forecast supply to add 673,500 square meters (2019E-2022E) with Paranaque City cornering majority of the future stock at 29% (Ayala Malls Bay Area – 192,000 square meters). DEMAND Average vacancy registered at around 3.0%, with Taguig City market posting strong occupancy (at around 98%) and Pasig City having the highest vacancy (at around 8-9%) due to the expansion of The Podium. F&B brands continued to lead the retail demand. Some of the new foreign Food and Beverage (F&B) brands that entered in 2Q19 are Shake Shack in Central Square in BGC, Original Cake in SM San Lazaro, Famous Amos in S Maison, and Taiwan’s One Zo in Promenade Food Court Greenhills. F&B brands that expanded during the quarter include Tiger Sugar, Botejyu, J.Co, Soban, Pound by Todd English and Pho Hoa. Fast fashion brands in the like of clothing and apparel, shoes and bags also dominated the retail market in 2Q19. Known brands that had expansion include Parfois, Charles and Keith, Onesimus, Ever New, Terranova, Superga, and Daniel Wellington. Several skincare brands, especially Korean brands opened in 2Q19. Known brands include The Saem, the Face Shop, and Innisfree. As part of re-entering the Philippine market, Innisfree opened second branch in SM Megamall.   RETAIL RENTS Average rentals range PHP 1,100 to 2,700 per square meter per month.   HOSPITALITY PROPERTY MARKET SUPPLY                 One hotel opened in 2Q19, providing an additional 93 rooms to the total hotel stock, specifically in Manila.  1H19 additions are at 486 rooms, brought upon by Sheraton Manila City and Hotel Lucky Chinatown. 2H19 is expected to bring an additional 4,800 rooms to the market, pushing up stock to over 41,000 rooms. Key hotels are multiple Red Planet hotels, Aruga by Rockwell Phase 3, Dusit D2 the Fort, multiple Seda developments, Novotel Manila, Hotel Okura, and Park Inn North EDSA. Succeeding years look to taper off, with significant increase in stock in Paranaque, Makati, Quezon City, and Taguig. The bay area (Pasay + Paranaque) and Makati take up majority of hotel stock, with future supply still dominated by the three cities.   DEMAND AND ITS DRIVERS Paranaque commands highest occupancy, brought about by strong pull of casino gamers and supplemented by its location near NAIA, pushing occupancy to above 90%. Other areas are seen to have occupancy within the 70 to 80% range. Makati and BGC, meanwhile, remain a strong business/ corporate, as well as MICE destination. In Quezon City, demand is driven mostly by MICE events from local companies and government. ROOM RATES Based on Deluxe room category rates, Manila City and Muntinlupa City hold the largest price per room because of The Manila Hotel and Crimson Hotel. Taguig room rates start at 11,000 because of the more upscale nature of hotels in the city and the profile it commands, specifically in BGC.   DAVAO CITY PROPERTY MARKET OVERVIEW (1H19)   OFFICE PROPERTY MARKET SUPPLY Total supply is at 220,000 square meters. Full take-up is noted for all Grade A/PEZA accredited office spaces except for Davao Finance Center, which was only completed by the end of 2018. A total of 87,000 square meters coming from 7 office building projects is anticipated over the next two years.  Developer share is spread across developers with Plaza de Luisa Development Corporation leading the market with 15% of office stock.     DEMAND Main demand drivers are O&O firms. A slowdown in take up was noted in 2017 and early 2018 due to the declaration and extension of martial law. However, a firm from the O&O industry took up majority of available supply in 4Q 2018. PEZA accredited projects are already fully occupied. Flexible workspaces are noted, with Regus having two offices and Skynora locating in Davao City last 2018. Davao Finance Centre started out slow, but has since reached around 50% in 6 months of operations. Strong office market take-up is anticipated. O&O expansion is foreseen as the main driver moving forward, supported by the large, healthy labor pool of skilled workers in Davao City. There is very high demand for PEZA approved office buildings as current PEZA stock is at 0% vacancy. Upcoming supply is still low and is a good opportunity for developers to take advantage of.   RESIDENTIAL CONDOMINIUM PROPERTY MARKET SUPPLY Total supply at 6,900 units, but is expected to increase to 21,300 units by 2022, driven by continuous expansion of existing residential projects and large pipeline from new entrants in Davao City. Current market leaders are the Ayala group and Filinvest Land Inc. Leader for market share of future units are SMDC with their massive Lane Residences development bringing in a total of 3,700 units. Following them are Filinvest Land Inc. which already has multiple projects and Cebu Landmasters Inc. which is venturing into three township developments. DEMAND Main demand drivers are local HNWIs, with OF Workers purchasing as well. Developments are mostly multiple tower mid-rise condominiums, with high rise condos gravitating towards the stretch of JP Laurel and the Poblacion District. Large jump in residential supply (6,900 units to 21,000 units). Main drivers will still be HNWIs, OF workers as secondary market. Condos primarily for investment purposes, has potential adaptation of condos into condotels/BnBs with the strong hotel sector.     RETAIL PROPERTY MARKET SUPPLY Total stock is currently at 865,000 square meters GFA, dominated by SM Prime, with 31% share and DSG Sons, with 22% share. Cebu Landmasters Inc. is anticipated to bring in two retail malls as part of their announced townships in Matina. Vista Mall is looking to enter the market in Maa, far from the city proper, with 35,000 square meters of GFA. Developments are gearing away from the downtown and JP Laurel areas because of the already strong presence of SM, Ayala, and DSG Sons in the area. LTS Malls Inc. has an upcoming redevelopment project along JP Laurel aAvenue as well. DEMAND                 Main demand drivers are expansion from local brands and locators with existing operations in Davao City. Retail development branching outside of the city proper of Davao City. Developers are starting retail projects outside the stretch of JP Laurel and the downtown area (Poblacion), due to high saturation in the said areas. Investors looking to consider retail developments have potential in the surrounding areas of Bajada, Matina, Maa, and Buhangin are anticipated.   HOSPITALITY PROPERTY MARKET SUPPLY 250 additional hotel rooms from two hotel developments within 1H19. Of the total supply, only 1,097 rooms are 4-Star, the rest being 3-star and lower. Forecast supply to reach 6,000 up to 2022, coming from 3 and 4-star hotels. Major supply is expected in the next two years, with 747 more units set for completion in 2019, due to slippages in anticipated hotel completions within 2018, and 663 units in 2020, dominated by the anticipated completion of the 519-room Hotel 101. Cebu Landmasters Inc. and LTS Malls Inc. have announced plans to put up convention centers in their upcoming projects. DEMAND MICE and Business Travelers are the main market drivers, along with local tourist arrivals. Monitoring tourist arrivals in 2018, the only lean month was in January. There is a healthy hotel sector, providing investment potential from developers and hotel operators. LGU provides MICE incentives. Lower-tier hotels are able to achieve high occupancy because of spillover of demand from hotels with convention facilities. Low growth in 4-star hotel rooms and absence of 5-star hotels are seen as opportunities for developer. LGU is looking for convention centers that can accommodate large events, with SMX convention center as the only one that can accommodate over 5,000 pax. There is also potential in reaching and serving the needs and wants of the growing influx of business and leisure tourists from international direct flights to Davao City to supplement the hotel sector.   JLL continues to be optimistic and excited about the future of the Philippine real estate industry and expects the 2nd half of 2019 and beyond to provide many opportunities for real estate stakeholders, that will surely redound to the country’s economic good.

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SSS conducts second wave of simultaneous RACE Ops

July 2, 2019

The state-run Social Security System (SSS) continued its nationwide campaign against non-compliant employers with its second simultaneous Run After Contribution Evaders (RACE) Campaign in Binondo, Cabanatuan, Dumaguete, and Iligan on Thursday.   SSS President and Chief Executive Officer Aurora C. Ignacio said 53 establishments were visited by the RACE team and posted Show Cause Orders to remind them of their obligations under Republic Act 11199 or the Social Security Act of 2018.   “The non-compliance of these establishments to the Social Security Law jeopardizes the social security protection of more than 125 employees as their employers failed to pay their contributions. Social security coverage is one of the basic rights of every employee," Ignacio said.   Of the 53 non-compliant business establishments, 14 were from Binondo in Manila, 13 from Cabanatuan City in Nueva Ecija, 11 from Dumaguete City in Negros Oriental, and 15 from Iligan City. The participating SSS branches are expected to collect ‪P4.12 million worth of contribution delinquencies from these employers.   The RACE Team in Binondo visited 14 establishments for not registering their business to SSS while 13 establishments were also visited in Cabanatuan due to non-registration of business, non-production of records, and non-remittance of SSS contributions.   In Dumaguete, 11 establishments received Show Cause Orders from the RACE Team due to non-remittance of SSS contributions and under-reporting of employees. SSS Dumaguete is expected to collect contribution delinquencies amounting to P1.70 million.   In Iligan, similar notices were also issued to six establishments due to non-reporting of employees, one for non-registration of business to SSS, and eight for non-remittance of SSS contributions with total delinquency worth of P2.42 million.   “With the simultaneous nationwide conduct of the RACE Campaign, we hope to further raise employers’ compliance with the Social Security Law,” Ignacio said.   All employers subject to the RACE operations should show cause within a non-extendable period of fifteen days from notice or posting of the order why no legal action shall be taken against them.   “Our employers can avoid being subjected to RACE campaign by coordinating with the nearest SSS branch to comply with the law. Currently, we have a Contribution Penalty Condonation Program wherein employers can settle their unpaid premiums without paying any penalty," Ignacio said.   “We encourage delinquent employers to avail themselves of this program and settle their obligations to SSS. The program will only run ‪until September 1 this year. This is their opportunity to clean up their records to have a good standing with SSS and pay their obligations without paying penalties,” she added.   This is the second time the pension fund conducted a nationwide simultaneous RACE campaign. The first leg of the simultaneous RACE campaign was also held in Mandaluyong City, San Fernando City in Pampanga, Mandaue City in Cebu and Dipolog City in Zamboanga del Norte last June 14. 

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PH bolsters fight against child labor

June 28, 2019

The labor department has strengthened its commitment of achieving a child-labor free Philippines as it pushes for more inclusive and preventive interventions in combatting child labor and its worst forms.   Labor Secretary Silvestre Bello III said DOLE has so far profiled 85,582 child laborers in 16 regions of which 18,651 were referred to appropriate agencies for the provision of services and assistance needed by the children and their families.   “Profiling of the child laborers is our strategic way of withdrawing children from child labor. We must first assess their needs and refer these children and their families to appropriate agencies and organizations for the provision of necessary assistance to remove them from child labor,” Bello said.   Apart from the nationwide profiling, DOLE has also provided livelihood assistance in form of Negokart and starter kits to parents of child laborers to enable their families to start their livelihood as a preventive measure against child labor.     Also, DOLE has partnered with the Technical Education and Skills Development Authority and Industrial Tripartite Councils for the provision of skills training to former child laborers to help them land decent employment.   “Eliminating child labor calls for intensified convergence efforts from various government agencies, non-government organizations, local government units, and the communities. We must work together in advocating for a child-labor free Philippines by understanding the problem that puts our children at harm,” Bello said.   DOLE, along with its social partners is all set to observe the World Day against Child Labor on June 29, 2019 at the GSIS Theater, Pasay City to draw public attention to the issue of child labor and encourage communities to be active partners of the government in ending child labor.   These initiatives of the labor department are aligned with the Philippine Development Plan 2017-2022, which targets to reduce the cases of child labor by 30 percent or 630,000 from the estimated 2.1 million child laborers nationwide

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President Duterte Attends PSG’S 122ND ANNIVERSARY, Commends Elite Group For Service To Nation

June 27, 2019

President Rodrigo Roa Duterte on Wednesday joined the Presidential Security Group (PSG) in its 122nd anniversary celebration expressing his gratitude to the elite unit for securing him and his family as well as for serving the nation.   “I extend my sincere appreciation and gratitude to the Presidential Security Group. Rest assured that this administration will remain committed to the continuing improvement and modernization of the PSG so you may perform your mandate more effectively and efficiently,” President Duterte said in his speech during the celebration held at the PSG Grandstand in Malacañang Park.   "Together, let us safeguard our nation, defend our people and march towards a brighter future for all,” he added.   President Duterte also recognized PSG’s unwavering commitment to defend the presidency and the country’s democratic institutions by going beyond its mandate of providing protection to the President and the First Family.   "The organization’s notable contributions, not only to the Office of the President, but also to the communities around Malacañang Complex, will be written in the annals of this institution’s long history," he said.   PSG troopers, who have demonstrated excellence in the fulfillment of their respective duties within the organization, was honored by the President.   He also acknowledged agencies, corporations, and individuals who have served as the PSG's reliable partners in its various undertakings.    President Duterte said he believes in PSG’s steadfast commitment to protect the presidency to the best of its abilities. "I am confident that through your professionalism, integrity, and courage, we can further serve our people during the remaining half of my Presidency."    The PSG is a combined elite unit of the Armed Forces of the Philippines (AFP) complemented by the Philippine National Police (PNP), Philippine Coast Guard (PCG), Bureau of Fire Protection (BFP), Metropolitan Manila Development Authority (MMDA), and civilian workforce.    Meeting with Misuari   President Duterte also discussed several domestic issues Wednesday, particularly the Mindanao peace process, the country’s financial standing, and the administration’s crackdown on graft and corruption.   With regards to Mindanao peace initiatives, he said he would organize a meeting with Moro National Liberation Front founder and leader Nur Misuari to put an end to MNLF rebellion, expressing his willingness to present Misuari’s group similar concessions offered by the government to the Moro Islamic Liberation Front (MILF).   "Central Mindanao medyo nagkalma na. We were able to really convince those guys. Sila Murad. And I'm trying to set up a meeting with Nur Misuari. I would conceive the same arrangement,” President Duterte said.   The President also reiterated his plan to open up barter trade in the Sulu archipelago to prop up economic activity and uplift the living conditions of the Moros there.   He said, however, that he would exclude Zamboanga since unscrupulous individuals and groups might use the system for smuggling. The navy has to intervene to fend off such activity.   During the 13th Brunei Darussalam-Indonesia-Malaysia-Philippines - East ASEAN Growth Area (BIMP-EAGA) Summit in Thailand last weekend, President Duterte asked his Malaysian counterpart to speed up the negotiations on the barter trade system between the Philippines and Malaysia in time for the Philippine government’s implementation of the Bangsamoro Organic Law (BOL) aimed at ending decades-long conflict in Mindanao.   The President believes that the institutionalization of the barter trade system in the area will help address poverty, conflict, and instability.  

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EcoWaste Coalition Raises the Alarm over Dangerous Weapon Toys

June 24, 2019

The EcoWaste Coalition sounded the alarm bell after buying toy weapons with sharp points and edges, including imitation “balisong” (fan knife), hunting knife and Naruto weapons such as “kunai” (dagger), “shuriken” (hand blade ) and “tanto” (sword).   The group bought the weapon toys yesterday, June 23, from toy retailers and wholesalers at M. de Santos and Tabora Sts., Binondo, Manila outside the Divisoria Mall.  These are sold for P55 to P120 per pack of 20 or 30 pieces. These weapon toys are often sold to children for P5 to P10 each by ambulant vendors or toy shops near public elementary schools and in some neighborhood sari-sari stores, the group said While very affordable, the use of such toys could result to injuries requiring first aid treatment or medical attention and should therefore be kept out of children’s reach, the group pointed out.   “Toys with sharp points and edges are potentially dangerous as these could tear a child’s sensitive skin or cause injury to a child eyes,” said Thony Dizon, Chemical Safety Campaigner, EcoWaste Coalition. “Ninja weapon toys inspired by Naruto, a Japanese manga series, are attractive to young children who are fascinated by action heroes.  However, some of these toys have pointed parts and sharp edges that can harm an unsuspecting child or his playmates,” he added. Aside from the accidental cuts, stabbing, and eye injuries, the EcoWaste Coalition is also concerned with the impact of such toys on the development of aggressive and violent behavior among children. “For example, we find it totally inappropriate for young children to play with ‘balisong,' which is often used in street altercations and crimes,” Dizon said. “We strongly suggest to both parents and kids to pick safe toys that do not invite aggression or violence such as toy weapons,” he emphasized.   To keep children safe and to discourage aggressive and violent behaviors, the EcoWaste Coalition advises parents to consider these tips: 1. Carefully read product labels and shun toys lacking the required labeling requirements such as age grading, cautionary warnings and usage instructions.  2. Select age and developmentally-appropriate toys. 3. Shun toys with sharp edges or points, small parts, long strings, small and loosely attached batteries, and toxic components such as lead-containing paint. 4.  Read the instructional literature and teach your child how to safely play with purchased toys. 5.  Supervise children under your care when they engage in indoor or outdoor play. The group also drew attention to the importance of choosing toys and childcare articles that are notified or registered with the Food and Drug Administration, which have undergone quality and safety verification procedures. Next month, the EcoWaste Coalition will conduct test buys of toys being sold outside public elementary schools to check on toy industry compliance to the newly-promulgated Implementing Rules and Regulations of Republic Act 10620, or the Toy and Game Safety Labeling Act.

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EMC simulates SRR role in Eastern Mindanao during NSED

June 24, 2019

The readiness of Eastern Mindanao Command's (EMC) fortified its disaster preparedness after simulating its role as lead agency in Search, Rescue, and Retrieval (SRR) cluster in the whole Eastern Mindanao during disasters of great magnitude, during the National Simultaneous Earthquake Drill (NSED), held nationwide on June 20, 2019.   The Command executed the drill in two phases: the first phase was focused on Duck, Cover and Hold evacuation procedure while the second phase was the simulation of the Command's role of overseeing the SRR operations in Eastern Mindanao.    It also covered communication exercises among its subordinate units, battle staff action, and Rapid Damage Assessment Survey.     During the drill, the Command likewise simulated a crisis management action via video teleconference with the National Command Post at Bayugan City, Agusan del Sur.   Lt. Gen. Felimon T. Santos Jr., Commander of Eastmincom reiterated the importance of the drill to the Command, being the lead agency in SRR Operations.   "Being the lead agency in SRR cluster, our exercise must go beyond duck, cover and hold to ensure our readiness and preparedness in carrying out our role in the wide range of disaster risk reduction management," Lt. Gen. Santos Jr. said.   The event here was evaluated by an Inter-Agency Team from the Disaster Risk Reduction Management Council (DRRMC) XI while the video teleconference in the National Command Post in Bayugan City was supervised and evaluated by the members of the National Disaster Risk Reduction Management Council. 

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