Philippine Property Digest Q Philippine peso depreciation continues, supported by the importation of goods for infrastructure projects

Transcription

1 Philippine Property Digest Q Philippine peso depreciation continues, supported by the importation of goods for infrastructure projects

2 The Philippine economy posts 6.9% y-o-y growth in 3Q17, beating market expectations Online gaming continues to be the top driver of office space demand, while the offshoring and outsourcing (O&O) industry experiences a temporary slowdown Approximately 7,300 units are added to the Metro Manila stock Economy Higher food prices causes inflation to rise to 3.4% in September, bringing the third quarter average to 3.1% Cumulative Overseas Filipino (OF) remittances from January to September 2017 amount to USD 20.8 billion, up 3.8% y-o-y Office Completion of six office developments adds 175,700 sqm of leasable space to the Metro Manila total stock in 3Q17 The Metro Manila vacancy rate reaches 5.5% in 3Q17, a slight increase from 5.0% in 2Q No additional retail supply in 3Q17 due to construction delays One hotel completes in 3Q17, adding approximately 200 hotel rooms OF remittances to boost consumer spending in 4Q17 The Department of Tourism (DOT) introduces Bring Home a Friend programme to boost tourist arrivals Retail Hotel Residential Two residential condominium project launches with an estimated 1,400 units Rents and capital values continue their upward trend, with rent growing at a slower pace

3 GDP GROWTH 3Q17 6.9% y-o-y 3Q17 AVERAGE INFLATION 3.1% ECONOMY OF REMIT Jan - Sep % y-o-y 175,700 sqm 3Q17 NEW SUPPLY 3Q17 NEW SUPPLY 7,300 units ONLINE GAMING DOMINATES AMONG DEMAND DRIVERS DEVELOPMENT LAUNCHES 1,400units OFFICE 5.5% AVERAGE VACANCY RATE ACROSS METRO MANILA RESIDENTIAL RENTS AND CAPITAL VALUES F&B BRANDS DOMINATE LIST OF NEW ENTRANTS IN PHILIPPINE RETAIL MARKET 3Q17 APPROXIMATELY +200 ROOMS NO NEW SUPPLY IN 3Q % TOURIST ARRIVALS 1H17 vs. 1H16 5.9% CONSUMER SPENDING 2Q17 (y-o-y) RETAIL HOTEL 1H17 TOURIST ARRIVALS SURPASSED 3 MILLION MARK

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5 Real Estate Services Economy

6 6 ECONOMY GDP Growth ( E) GDP Growth (constant 2000 prices) Source: Philippine Statistics Authority; Oxford Economics for forecast figures Inflation Rate ( E) Inflation Rate (2006 = 100) 8% 7% 6% 5% 4% 3% 2% 1% 0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% E 2018E 2019E 2020E 2021E The Philippine economy grew by 6.9% in 3Q17, recording the fastest in the last four quarters. It surpassed the upwardly revised 6.7% growth in the preceding quarter, as well as consensus market expectations. Polls from Bloomberg and Reuters had median projections of only 6.5% GDP growth for the quarter. The growth was mainly driven by manufacturing, trade and real estate, renting and business activities. Among the major sectors, Industry recorded the fastest growth of 7.5%, followed by Services with 7.1%. On the other hand, Agriculture slowed down by 2.5% from the 3.0% growth last year. An average inflation rate of 3.4% was reported in September 2017, raising the average inflation rate for 3Q17 to 3.1%, higher than the 2.0% inflation recorded in 3Q16. The increase in inflation was primarily due to the 4.3% inflation of transportation prices in the quarter compared with the 0.1% inflation in 3Q16. Housing, water, electricity, gas and other fuels also significantly increased by 2.9% in 3Q17, faster than the 0.3% growth in 3Q16. Nonetheless, inflation rates are expected to remain within the inflation target of 2-4% at end % 0.0% E 2018E 2019E 2020E 2021E Source: BSP; Oxford Economics for forecast figures

7 7 ECONOMY The Philippine peso per US dollar rate averaged PHP at end-september The Philippine peso continued to weaken against the US dollar in 3Q17, with an average of PHP per USD The weakening Philippine peso was mainly due to the continuous importation of goods in the construction industry, as it parallels the current administration s efforts in the Build, build, build Programme, according to analysts. Despite the Philippine peso falling, Bangko Sentral ng Pilipinas (BSP) remains positive that this would improve the economy s productive capacity. The Philippine peso s depreciation can also be attributed to the US Federal Reserve rate hike and the ongoing geopolitical risk between the United States and North Korea. Foreign Exchange Rate PHP/USD ( E) Exchange Rate (PHP:USD) E 2018E Source: BSP; Oxford Economics for forecast figures 2019E 2020E 2021E From January to September 2017, OF cash remittances amounted to USD 20.8 billion, a 3.8% growth y-o-y due to the stable demand for skilled Filipinos abroad. America and the Middle East were the main sources of OF remittances. The World Bank is expecting OF remittances to surge 23.0% y-o-y by end-2017 due to the expanding economies of the United States, the European Union and the Russian Federation, pushing the Philippines as the country with the third largest OF remittances volume next to India and China. OF Cash Remittances ( E) OF Cash Remittances (USD billion) E 2018E 2019E 2020E 2021E Source: BSP; Oxford Economics for forecast figures

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9 Office

10 Philippines 10 Office Prime and Grade A Office Stock in Metro Manila by sub-district ( E) Annual Grade A Office Supply (in thousand sqm) 1,600 1,500 1,400 1,300 1,200 1,100 1, Makati CBD Bonifacio Global City McKinley Hill Quezon City Alabang Bay City Source: JLL Research & Consulting Estimated Vacancy Rates in Metro Manila by sub-district Sub-district Estimated Vacancy Rates 3Q E 2018E 2019E 2020E 2021E 2Q17 Makati CBD 2% 2% BGC 5% 5% McKinley Hill 5% 6% Ortigas CBD 4% 2% Quezon City 11% 11% Alabang 11% 8% Bay City 6% 13% Ortigas CBD Supply As of 3Q17, total office stock of Prime and Grade A developments reached approximately 6.6 million sqm, 2.7% higher than the recorded office stock in 2Q17. Prime and Grade A office developments continue to be concentrated in major CBDs Makati, Bonifacio Global City (BGC) and Ortigas, accounting for more than half of total office stock. The rest of the office stock came from Quezon City, Alabang, Bay City, McKinley Hill, Manila and other fringe locations. Office developments completed in 3Q17 include The 30th Corporate Center by Ayala Land and Ortigas Technopoint Two by Ortigas & Co. in Ortigas CBD; Menarco Building by Menarco and The Curve by Irmo in BGC; Tower 2 of Double Dragon Plaza by Double Dragon in Bay City; and The North Tower of Rockwell Business Center-Sheridan in Mandaluyong. These added an estimated 175,700 sqm of leasable space to total office stock in Metro Manila. Approximately 3.0 million sqm will be added to total office supply stock from 4Q17 to Significant newly added office developments in the supply pipeline are Gentry Corporate Plaza by Ayala Land and Frabelle Corporate Plaza by Frabelle Fishing Corporation in Makati; Capital House by Ayala Land in BGC; Exquadra Office Tower by Unioil Petroleum Philippines and Glas Tower by Green Asia in Ortigas; Tower 3 of Vertis North Corporate Center by Ayala Land in Quezon City; and One Griffinstone by Griffinstone in Alabang. Note: Vacancy rates refer to the available office space in existing Prime and Grade A developments. Source: JLL Research & Consulting Meanwhile, several office building completions were delayed in 3Q17 and pushed back to 4Q17 due to insufficient number of available skilled construction workers and restrictive city government regulations such as limiting hours of construction in BGC and some parts of Makati CBD. The developments that experienced delay in completion include Metrobank Center by Filinvest Land in BGC, IBP Tower by Ortigas & Co and St. Francis Square by St. Francis Square Holdings in Ortigas CBD, and Tower 2 of Vertis North Corporate Centers by Ayala Land in Quezon City. Demand There was a diversified tenancy observed in 3Q17, where online gaming got the largest share of total office space transactions. Other key office space transactions came from consulting, manufacturing, communications, pharmaceutical and e-commerce. The O&O industry continued to slowdown due to the wait-and-see behaviour of potential investors given the geopolitical issues in the country. Other contributors to office

11 Philippines space demand were from banking, finance, IT and traditional office space occupiers. Estimated Monthly Rents in Metro Manila by sub-district The overall vacancy rate in Metro Manila reached 5.5% in 3Q17 from the 5.0% recorded in 2Q17. Across sub-districts, the highest vacancy rate was observed in Alabang and Quezon City, both at 11.0%. Meanwhile, Makati CBD and Ortigas CBD had the lowest vacancy rates at 2-4% on the back of strong take-up by online gaming firms and traditional office occupiers. Bay City, BGC and McKinley Hill recorded a midpoint level among sub-districts at 5-6%. Asset Performance High infrastructure spending and resilient domestic demand enabled the country to experience a favourable macroeconomic environment, allowing rents and capital values to increase marginally q-o-q. Rents in Metro Manila sub-districts exhibited growth q-o-q, except for Alabang that showed a minimal decline. BGC slightly caught up with Makati CBD in displaying higher rents with Makati ranging from PHP 650 to PHP 1,400 per sqm per month and BGC ranging from PHP 700 to PHP 1,200 per sqm per month. This is followed by Ortigas CBD with rents between PHP 470 to PHP 950 per sqm per month. A marginal growth was observed in the remaining sub-districts. Capital values in Metro Manila sub-districts increased significantly in 3Q17. Makati CBD continued to have the top-selling per sqm prices ranging from PHP 110,000 to PHP 199,000, followed by BGC from PHP 121,000 to PHP 165,000 per sqm and Ortigas CBD from PHP 50,000 to PHP 131,000 per sqm. Outlook Succeeding office developments slated for completion in the next few years are likely to allow growth of rents to stabilise. Capital values are foreseen to appreciate further due to high sales takeup of office-for-sale developments. The lack of enough skilled construction workers and the tight government restrictions are expected to delay building completions in the coming quarters. The Information Technology and Business Process Association of the Philippines forecasts the slowdown in the O&O industry to continue, as reflected by the trimming down of annual growth to 9% until Factors to consider are the larger scale, sluggish global industry growth and the geopolitical security headwinds in the Philippines. Meanwhile, the demand from online gaming is likely to lift overall office space demand owing to the increasing inquiries from online gaming firms typically of Chinese origin. Sub-district Rent Range (PHP/sqm/month) 3Q17 Estimated Capital Values in Metro Manila by sub-district 2Q17 Makati CBD 650-1, ,400 BGC 700-1, ,190 McKinley Hill Ortigas CBD Quezon City Alabang Bay City Notes: Rent ranges were quoted as minimum and maximum asking rents, excluding air-conditioning charges and common use service area charges, of existing Prime and Grade A office developments. Source: JLL Research & Consulting Sub-district Capital Value Range (PHP/sqm) 3Q17 2Q17 Makati CBD 110, , , ,000 BGC 121, , , ,000 Ortigas CBD 50, ,000 50, ,000 Notes: Capital value ranges were quoted as minimum and maximum asking price per square metre, excluding VAT, of existing Prime and Grade A office developments. Source: JLL Research & Consulting 11 OFFICE

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13 Residential

14 Philippines 14 RESIDENTIAL Residential Condominium Stock in Metro Manila by sub-district ( E) Number of Condominium Units 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, Note: Residential stock refers to the mid-range to high-end residential condominium units in Metro Manila. Source: JLL Research & Consulting Development Completions in Metro Manila by sub-district (3Q17) 2015 Note: Completion refers to the total number of units of mid-range to high-end residential condominium developments completed in 3Q17. Source: JLL Research & Consulting E 2018E 2019E 2020E 2021E Makati CBD & Fringe BGC / Taguig Ortigas/ Pasig/ Mandaluyong McKinley Hill Quezon City Alabang Bay City Newport City Manila/Pasay Parañaque / Muntinlupa 10% 20% Makati CBD 8% Bay City 2% 28% 32% Manila Ortigas Bonifacio Global City Quezon City Supply Total cumulative stock of mid-range to high-end residential condominium units in Metro Manila as of 3Q17 was estimated at 276,900. Approximately 5,100 units completed in 3Q17, 41% of which are located in Makati CBD. Major developments completed include Shang Salcedo Place by Shang Properties in Makati CBD; Tower 1 of Avida Towers Asten by Avida Land and Trump Tower by Century Properties in Makati Fringe; Noble Place by Megaworld in Manila City; Tower 3 of Avida Towers Centera in Mandaluyong and High Street South-One Maridien by Alveo Land in Bonifacio Global City (BGC). Some notable developments scheduled to complete by end-2017 include Monarch Parksuites by Anchor Land in Bay City; University Tower Noval by Prince Jun Development and Torre de Manila by DMCI Homes in Manila; Vista Shaw by Vista Land and Zitan by Greenfield Development in Ortigas; Tower 2 of Avita Towers Vita in Quezon City and Tower 1 & 2 of Avida Towers 34th Street in BGC. For the pre-selling market, only two residential developments were launched in 3Q17, namely West Tower of The Arton by Rockwell Land in Katipunan Avenue, Quezon City, and The Connor by Ortigas & Co. in San Juan City. The number of licences to sell (LTS) issued by the Housing and Land Use Regulatory Board (HLURB) for residential developments in the Philippines increased by more than 17% y-o-y in 3Q17. LTS for the mid-income housing units increased by approximately 64% while LTS for socialised and economic housing units grew by 47% and 34% y-o-y, respectively. Mid- to high-end condominium LTS increased by 4% y-o-y. For the first nine months of 2017, 509 projects with more than 191,600 residential units were issued with LTS. Demand The demand for residential property remained healthy in 3Q17. For the high-end segment, vacancy rates in Makati CBD and BGC increased to 2.5% in 3Q17 from 1.4% in 2Q17. The demand mainly came from expatriate employees in

15 Philippines multinational companies and foreigners retiring in the Philippines. For mid-range condominium units, demand was driven by the higher purchasing power of Filipinos sourced from remittances of relatives working abroad. Cumulative cash remittances grew by 3.8% y-o-y to USD 20.8 billion for the first nine months of The majority of the remittances came from the United States, Saudi Arabia, the United Arab Emirates, Singapore, Japan, the United Kingdom, Qatar, Kuwait, Germany and Hong Kong. Newly Launched Projects in Metro Manila (3Q17) Expected Completion 2022 Development The Arton-West Tower Developer Rockwell Land No. of Units The Connor Ortigas & Co. 970 Note: Data on expected completion dates and number of units may change depending on the plans of developers. Source: Various brokers and developers, JLL Research & Consulting Despite the observed slowdown in demand from the O&O industry in Metro Manila, the leasing activity for mid-range condominium units remained strong, coming from knowledge process outsourcing and business process outsourcing employees with an average monthly salary of PHP 37,000 for junior executives with less than five years of experience and PHP 68,000 for supervisors with 5-10 years of experience. Meanwhile, the continued growth in demand of the residential sales market was manifested by the increase in prices of residential condominium units in Metro Manila in 2Q17 to 3.0% q-o-q, from 2.5% in 1Q17, based on the 2Q17 Residential Real Estate Price Index being published by the Bangko Sentral ng Pilipinas. While there were only two residential developments launched in Metro Manila in 3Q17, the HLURB issued LTS for an estimated 18,300 residential condominium units located in Metro Manila. Asset Performance Average rents across all sub-districts maintained an upward trajectory in 3Q17. Makati CBD and BGC still recorded the highest rents in Metro Manila, ranging from PHP 650 to PHP 1,000 per sqm per month for mid-range units and from PHP 720 to PHP 1,900 per sqm per month for high-end units. Mid-range residential units in Ortigas/Mandaluyong have rents ranging from PHP 410 to PHP 700 per sqm per month. Meanwhile, Alabang showed rents ranging from PHP 540 to PHP 905 per sqm per month. Asking rents of mid-range units in Quezon City ranged from PHP 430 to PHP 710 per sqm per month. LTS Issued for Residential Developments in the Philippines (Number of Units) Socialised Housing Economic Housing Low-Cost Condominium Mid-Income Housing Open Market Housing Mid- and High-End Condominium 0 10,000 20,000 Number of Units 1Q-3Q17 1Q-3Q16 Note: Source of basic data HLURB; estimates and computations by JLL Research & Consulting Source: HLURB 30,000 40,000 50,000 60,000 70,000 80, RESIDENTIAL

16 Philippines 16 RESIDENTIAL Estimated Monthly Rents in Metro Manila by sub-district Sub-district Mid-Range Rent Range (PHP/sqm/month) 3Q17 Estimated Capital Values in Metro Manila by sub-district 2Q17 Makati CBD BGC 740-1, ,000 Ortigas/Mandaluyong Quezon City Alabang High-End Makati CBD 720-1, ,800 BGC Note: Rent ranges were quoted as minimum and maximum asking rents per square metre per month in select completed developments per sub-district. Prices are exclusive of VAT and association dues Source: JLL Research & Consulting Sub-district Mid-Range Capital Value Range (PHP/sqm/month) 3Q17 2Q17 Makati CBD 115, , , ,000 BGC 119, , , ,000 Ortigas/Pasig/ Mandaluyong 85, ,000 84, ,000 Quezon City 84, ,000 82, ,000 Alabang 86, ,000 86, ,000 High-End Makati CBD 175, , , ,000 BGC 156, , , ,000 Note: Capital value ranges were quoted as minimum and maximum asking price per square metre in select completed developments per sub-district. Prices are exclusive of VAT and association dues. Source: JLL Research & Consulting Meanwhile, capital value growth outpaced rent growth. Average capital values of luxury condominiums in Makati CBD and BGC in 3Q17 increased by 0.9% q-o-q. BGC and Makati CBD continued to command the highest selling prices in Metro Manila, with BGC ranging from PHP 119,000 to PHP 200,000 per sqm for mid-range developments and from PHP 156,000 to PHP 200,000 per sqm for high-end developments. On the other hand, Makati CBD prices ranged from PHP 115,000 to PHP 170,000 per sqm for mid-range developments and from PHP 175,000 to PHP 286,000 per sqm for high-end developments. Mid-range developments in Ortigas/Pasig/ Mandaluyong had capital values ranging from PHP 85,000 to PHP 150,000 per sqm; Quezon City ranged from PHP 84,000 to PHP 130,000, while Alabang prices were from PHP 86,000 to PHP 130,000. Outlook Interest in residential investment in Metro Manila is seen to continue growing at a steady state, at least for the next 12 months, coming from foreign and local investors and OF workers. Inquiries and pre-sold residential units are reported in emerging sub-districts such as Bay City and Alabang, owing to the booming online gaming industry and the sustained growth from the O&O industry. Some foreign buyers are investors from China, Singapore and Japan. Approximately 112,100 units are expected to be added to total Metro Manila residential condominium stock from 4Q17 to These upcoming developments will concentrate in major CBDs such as BGC, Makati, Ortigas and Quezon City, as well as the emerging CBD Bay City which is projected to account for the largest share of 19% of total stock by end-2021.

17 Retail

18 Philippines 18 RETAIL Retail Developments Scheduled for Completion in 4Q17 Development Developer Location Ayala Malls Cloverleaf ALI Quezon City Ayala Malls Feliz ALI Pasig City Ayala Malls Marikina ALI Marikina City Podium Mall (expansion) Powerplant Mall (expansion) SM Mall of Asia (expansion Phase I) SM Prime Holdings (SMPH) and Keppel Land Rockwell Land Corp. SMPH Source: Various developers; JLL Research & Consulting Ortigas CBD Cumulative Existing Retail Shopping Mall Supply in Metro Manila ( E) Cumulative Mall Supply (in million sqm) Makati CBD Bay City Note: Indicated supply is measured in terms of the GFA of the retail developments. Source: JLL Research & Consulting E 2018E 2019E 2020E Supply Eight new malls in the country became operational in 3Q17. These are SM City Puerto Princesa; Robinsons Place in Iligan and Naga; and City Malls in Dau, Pampanga, Dumaguete and Goldenfields Bacolod City. SM City Puerto Princesa is one of the upscale retail developments of SM Prime Holdings outside Metro Manila, taking advantage of the accelerating growth in tourist arrivals in Puerto Princesa, Palawan. On the other hand, no new shopping centres or retail expansion projects in Metro Manila were completed in 3Q17 due to delays in construction. An estimated 253,000 sqm of retail space is expected to be added to Metro Manila total retail stock by end Malls that are due for completion in 4Q17 are Ayala Malls Cloverleaf, Ayala Malls Marikina and Ayala Malls Feliz. Expansion projects expected to be operational in 4Q17 are SM Mall of Asia (Phase I), Podium Mall and Power Plant Mall. Developers of these retail developments are expediting construction as they aim to be operational during the Christmas season when consumer spending of Filipinos is at peak level. Demand The estimated average vacancy rate in Metro Manila for 3Q17 was recorded at 2.5%, as demand surged for premier retail space in consumer-rich markets such as Bonifacio Global City and Makati City. The Philippines remains an attractive location for foreign retailers due to the relatively cheaper cost of doing business in the country and the continuous rise of consumer spending of Filipinos, growing by 5.9% y-o-y in 2Q17. New entrants to the Philippine retail market in 3Q17 include international F&B retailers such as Pizza Studio

19 Philippines (USA) in Uptown Parade Mall, Gelare (Australia) and Olivia & Co. (Singapore) in Uptown Mall and Marugame Udon (Japan) in Bonifacio High Street. Pizza Studio in Uptown Parade is the first branch in Asia of the Los Angeles-based pizza franchise known for its create-your-own-pizza concept and quick-served specialty pizza. Bistro restaurant Olivia & Co. in Uptown Mall, on the other hand, is the first store of the said F&B brand outside Singapore. The growth of these F&B brands in the country is anchored in the 40% usual share of F&B on the total expenditure of Filipino households, recorded at 41.2% in 2Q17. New Retailers that Entered the Philippine Market in 3Q17 Retailer Brand Country of Origin Retailer Type Gelare Australia F&B In Good Company Singapore Clothing Marugame Udon Japan F&B Olivia & Co. Singapore F&B Pizza Studio USA F&B Zero Halliburton USA Luggage Source: JLL Research & Consulting Retailers that expanded their leased properties in 3Q17 include H&M in SM Mall of Asia and Greenbelt Center. Other retail brands that became operational in 3Q17 include Royce in Power Plant Mall, Michael Kors and Samsonite in Greenbelt Center and DaTang Jardin in Venice Grand Canal Mall. The O&O industry also creates a spillover effect, benefiting the retail market as it contributes to the growth of income of the middle class. The sustained growth of the OF cash remittances is another demand driver expected to soar in 4Q17 due to the expected generous consumer spending in light of the Christmas season. Outlook A strong consumer base, coupled with a positive consumer outlook and increased government infrastructure projects, is expected to sustain growth in retailers entering the Philippine market. This growth is likely to accelerate when the plan of the government to lower the required minimum capital of foreign retail investors to USD 200,000 is enacted. This translates to more small- to medium-scale foreign retailers venturing into the Philippine market, as only 8.0% of the current USD 2.5 million required minimum capital is required in order to set up a branch in the country. 19 RETAIL

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21 Hotel

22 Philippines Recently Opened Hotels in Metro Manila (3Q17) Development Tryp by Wyndham Manila Source: JLL Research & Consulting Select Upcoming Hotel Developments (2017E-2021E) Completion Date Location Mall of Asia Complex, Bay City, Pasay City Development No. of Rooms 195 No. of Rooms 2017 Savoy Newport Hotel Grand Hyatt Manila Hilton Manila Admiral Suite MCollection Seda Hotel BGC Expansion Seda Circuit Makati Sheraton Manila The Westin Manila Sonata Place Novotel Suites Manila Seda Bay Area Westside City 1,500 Source: JLL Research & Consulting Supply One of the largest and most diverse hotel companies in the world, Wyndham Hotel Group, held a soft opening of its first hotel in Southeast Asia called Tryp by Wyndham Manila in 3Q17. The 195-room hotel, located in Bay City, entered the country through an agreement with Microtel Inns & Suites (Philippines), Inc. Meanwhile, Federal Land and Japan s Orix Corporation presented joint-venture hotel project, Grand Hyatt Manila, to select guests in September The 66-storey hotel with 460 rooms is already accepting reservations for its first operational month set in January It is one of the features of Federal Land s 10-ha Grand Central Park development in BGC. Aside from the Grand Hyatt Manila hotel project, Federal Land has also inked a deal with Japan s Nomura Real Estate Development and Isetan Mitsukoshi Holdings to build a USD 400 million Japanese-inspired retail and residential complex in BGC called Sunshine Fort. This includes four residential towers catering to the upper-middle income market. One new hotel development and one hotel expansion project are expected to complete in 4Q17, adding 875 hotel rooms. These are Travellers International s new Savoy Newport Hotel and Maxims Hotel expansion project, which are both located in Newport City. An estimated 8,000 hotel rooms and 500 serviced apartment units are expected to be added to total hotel stock from 4Q17 to Demand June 2017 saw a 3.4% y-o-y growth, as 474,854 tourists visited the country in the said period. The Philippines had an estimated 3.4 million tourist arrivals in 1H17, 12.7% higher than 1H16 arrivals. Korea, the USA and China continued to be the leading sources of tourists in the Philippines, contributing 23.7%, 15.3% and 13.6% to June 2017 total tourist arrivals, respectively. Completing the top five sources of tourist arrivals are Japan with an 8.8% 22 Hotels

23 Philippines share and Australia with 3.9%. In terms of sub-regional grouping, East Asia remains the biggest source of tourist arrivals, with 1,731,463 arrivals, holding a market share of 51.6% in 1H17. Meanwhile, tourism receipts for 1H17 totalled PHP billion, 14.9% higher than the 1H16 figure. The 31st Association of Southeast Asian Nations (ASEAN) Summit and related meetings to be held on November 2017 in the Philippines are expected to bode well for the tourism market of the country. Particularly, Pampanga Province and Metro Manila will benefit from the spillover effects of the events, as these areas are the chosen locations for the ASEAN Summit and related meetings. With executives and diplomats flocking to the Philippines, demand for high-end accommodation will see an influx in said areas. Meanwhile, demand for hotel accommodation outside of Manila remains strong, evidenced by the high tourist arrivals in airports in Cebu (91,805), Kalibo (44,456) and Clark (19,661) recorded in June Palawan, on the other hand, received another recognition with its 8.2-km Puerto Princesa Subterranean River ranking 30th among the 50 Works of Art named by Bija Knowles, CNN Travel site editor. Outlook The ASEAN Summit, along with remaining festivals to be held in 4Q17 and the upcoming Christmas season, is expected to help generate ample tourists in the Philippines for 4Q17. The country needs at least 3.2 million foreign tourist arrivals in order to reach the 6.5 million to 7.0 million target set by the DOT for One of the efforts of the DOT to reach the target tourist arrivals is the relaunching of the Bring Home a Friend programme, wherein Filipinos who would like to invite their foreign friends to visit the country could be rewarded based on the guidelines of DOT. When it comes to supply, minimal growth is projected due to the limited number of available, developable lots in Metro Manila. International Tourist Arrivals ( E) 6,000 5,000 4,000 3,000 2,000 1,000 0 Note: The compounded annual growth rate from 2000 to 2016 was used to forecast tourist arrivals for 2017 to Source: DOT; JLL Research & Consulting for projections 23 Hotels Tourist Arrivals (in thousands) 9,000 8,000 7, E 2018E 2019E 2020E 2021E

24 For more information, please contact: Claro dg. Cordero, Jr. Local Director Head of Research, Consulting & Valuation JLL Philippines Claro.Cordero@ap.jll.com JLL Philippines Note: The Philippine Property Digest covers the Prime and Grade A office, mid-range to high-end residential condominium, retail shopping mall and hotel markets in Metro Manila. COPYRIGHT All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of JLL. The items in this publication have been compiled from the various sources acknowledged. The information is from sources we deem reliable; however no representative or warranty is made to the accuracy thereof.