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MANILA OFFICE REPORT

4Q10
BEAT ON THE STREET
ECONOMY
2011 is perceived to be a critical year as it remains to be determined “The next quarter will be crucial for
whether the country will be able to sustain growth amidst certain risks. Companies looking to take on new space and
Such risk include the negative impact of the flood of speculative capital as consider relocating to more favorable
premises at current bottomed rates. Lease
investors run to developing economies, prices of financial assets may also rates will start moving upwards as developers
be affected by the direction and strength of capital flows amidst the global do not have additional supply for 2011.” -
rebalancing occurring in the world economy, and the stiffer regulatory Josemari Cuervo, President & CEO; Cuervo
changes resulting from the stricter capital rules under Basel III which may Far East in association with Cushman &
later on affect the profitability of banks. The need to continue capital market Wakefield.
reforms is therefore emphasized. The monetary board on the other hand
ECONOMIC INDICATORS
has kept borrowing and lending rates unchanged at 4% and 6%
respectively. The government overshot its investment targets for 2010, with 2009 2010F 2011F
Philippine Economic Zone Authority (PEZA) and Board of Investments GDP Growth 1.13% 5-6% 7-8%
(BOI) combined registered Php503.39 Billion worth of approved
CPI Growth 3.4% 3-5% 3.5-5.5%
investments. This growth was led by electronics and manufacturing
sectors. Inflation may have slightly increased in the 4th quarter due to the Unemployment 7.5% 7.3% 7.3%
holiday spending, higher food and fuel prices but the full-year figure stayed Rate
within target range. Fiscal health remains to be a concern. In fact, foreign Employment Rate 92.5% 92.7% 92.7%
debt rose to US$59.8 Billion as a result of increased borrowing and foreign
Source: NSCB, NSO, NEDA, CFEI
exchange revaluation. Policy makers argue that public debt is still
manageable since most of these loans were spread over a long period. MARKET FORECAST
OVERVIEW ABSORPTON: This trend of low
2010 ended with very little changes in lease rates in most submarkets. In absorption rates as a lag effect of the
recent world economic slump, will likely
fact, as expected the market remained relatively at the bottom for the
continue for the remaining part of the
remaining part of 2010. The year ended with the office market generally year.
considered to be largely tenant-favorable. The “wait-and-see” attitude of the
market has ended shifting towards optimism as investor sentiment CONSTRUCTION: There are a number
improves. The 4th quarter may also be characterized by stably low lease of notable office projects in 2009 and
2010. Continuous shoring up of new
rates, with high vacancy rates in most submarkets. Makati CBD’s prime supply, however diminished, is likely to
rates averaged at Php850psmpm, whereas vacancy rate stood at 8.75%. continue despite fragile world economy.

OUTLOOK RENTAL RATES: Lease rates are likely


Improving investor sentiment and economic indicators tends to support the to remain stable for 2010. Gradual
increases may occur come 2011.
general consensus that 2011 will continue to be a better year for the office
market. The expectation of a commencement of the general increases in
GRADE A RENTAL VS. VACANCY
lease rates is still holding up. The slowdown or even lack of developers RATES
shoring up new supply in 2010 will likely result to restrictions in supply
come 2011, putting pressure on vacancy rates. 1,500 PHP/sq.m./mth 10%
1,400
9%
1,300
Absorption rates are likely to increase, particularly in non-CBD areas such 1,200
1,100
8%
7%
as Fort Bonifacio and Quezon City come 2011 as demand picks up, led by 1,000
900 6%
Business Process Outsourcing (BPOs). From being tenant-favorable in 800
700
5%

2010, the market will shift to neutral come 2011 until 2012. The 600 4%
500
Implementing Rules and Regulations (IRR) of the Real Estate Investment 400
3%
300 2%
Trust (REIT) Law is expected to be released come 2011, leading to 200
1%
100
increased investments not only in the office market but also for the Real 0 0%

Estate Industry as well. 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Rent Vacancy
1 MANILA OFFICE REPORT 4Q10
MANILA OFFICE REPORT 4Q10

MARKET / SUBMARKET STATISTICS


OVERA LL YTD YTD
CONSTRUCTIO
VACA NCY UNDER OVERA LL GRADE A RENTA L RA TE*
N
INVENTORY CONSTRUCTION COM PLETIONS A BSORP TION
M A RKET/ SUB M A RKET RA TE Php Euro US $
(Sq.m.) (Sq.m.) (Sq.m.) (Sq.m.)
Ortigas Center 1,135,000 3.2% 550 9.47 12.55
Makati CBD 2,718,097 8.75% 66,000 850 14.63 19.39
Fort Bonifacio 1,618,481 6.0% 31,600 12,000 600 10.33 13.69
Filinvest Corporate 700,000 22.0% 450 7.75 10.27

*Php/psm/mth
Exchange Rate:
US$ = Php43.8300
EUR = Php58.0930
Source: CFEI

MARKET HIGHLIGHTS

SIGNIFICANT 4Q10 NEW LEASE TRANSACTIONS


BUILDING SUBM ARKET TENANT SQUARE M ETERS BLDG CLASS

Bldg. G Quezon City IBM 2,600 A


Commerce & Industry Plaza Fort Bonifacio Factset 1,600 A
Commerce & Industry Plaza Fort Bonifacio UAE Embassy 1,600 A
SIGNIFICANT 4Q10 SALE TRANSACTIONS
BUILDING SUBM ARKET Buyer SQUARE M ETERS PURCHASE PRICE

N/ A
SIGNIFICANT 4Q10 CONSTRUCTION COMPLETIONS
BUILDING SUBM ARKET M AJOR TENANT SQUARE M ETERS COM PLETION DATE

Jecoprime Fort Building Fort Bonifacio N/ A 12,000 4Q 10

SIGNIFICANT PROJECTS UNDER CONSTRUCTION/ RENOVATION


BUILDING SUBM ARKET M AJOR TENANT SQUARE M ETERS COM PLETION DATE

W Office Fort Bonifacio N/ A 9,108 1Q 11


GA Corporate Center Quezon City N/ A 10,000 1Q 11
Sun Life Center Fort Bonifacio N/ A 22,500 2Q 11
Zuellig Building Makati CBD N/ A 66,000 3Q 12

FOR INDUSTRY-LEADING INTELLIGENCE TO SUPPORT YOUR REAL ESTATE AND BUSINESS DECISIONS, GO TO CUSHMAN & WAKEFIELD’S KNOWLEDGE CENTER AT: www.cushmanwakefield.com/knowledge
*Market terms & definitions based on BOMA and NAIOP standards.

This report contains information available to the public and has been relied upon by Cushman & Wakefield on the basis that it is accurate and complete.
Cushman & Wakefield accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the
accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other
conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. Cushman & Wakefield of California, Inc.
©2010 Cushman & Wakefield, Inc. All rights reserved.
Cuervo Far East, Inc. 601 South Figueroa Street, 47th Floor
101 Esteban St. Cor. Dela Rosa St., Lic. # 00616335
Please consider your environmental responsibility before printing this report. Legaspi Village, Makati City, Philippines Los Angeles, California 90017
Trunk Line: (632) 750-6610 (213) 955-5100
Fax: (632) 750-6603
2 MANILA OFFICE REPORT 3Q10

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