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OFFICE Makati : Investing in, or renting Office space (AFT, etc.)

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iAcademy - new office coming near Linear / TechZone area

The ground was broken very recently

iAcademy-2.jpg

> ssc thread: http://www.skyscrapercity.com/showthread.php?t=1987103

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"Green" AFT / Alveo Financial Tower is growing once again

AFT-Kroma-Jun10-30pct_zpssfwifkw3.jpg

Taken from a few steps up towards the (new, green) walkway

 

Alveo Financial Tower | 188m | 49 fl | U/C - SkyscraperCity

The old Jaka tower has been renewed, as Alveo Financial Tower (AFT) - scheduled height: 188 meters, with 49 storeys.

That's PB Com Tower in the background - the 2nd tallest building in PH : Official Height: 259 metres (850 ft), with 52 storeys

 

pbcom_tower_zpslibciyyg.jpg

The Philippine Bank of Communications (PBCom) Tower

 

Soaring high its “PBCom” signage, this skyscraper dominates to be the (now second) tallest completed building in the Republic. I say “completed” because as of now while I am working with this post, The Gramercy Residences along Kalayaan Avenue in Makati City is now the tallest building however, she is still under construction.

The PBCom tower for most of the skyscraper is I believe to be one of the most well-known landmark along the span of Ayala Avenue. Near this office building is the unloading zone of hundreds of people from buses that come from Quezon City, Mandaluyong City, Pasig City and other places from northern Metro Manila Area. This is one of the finest infrastructure of the Philippine economy in the 21st century. Days and nights this building never sleeps.

==

> https://lonjaurigue.wordpress.com/2010/12/07/the-philippine-bank-of-communications-pbcom-tower/

 

ALVEO Financial Tower, from Presentation

Alveo-Financial-Tower_6.jpg

 

AFT will have loads of parking - 19 floors!

alveo-financial-towe-30871-5.jpg

 

aft2.jpg

How AFT will look at ground level
Alveo-Financial-Tower-Makati_6.jpg

Demand for office space exceeds supply...

 

0HypVoe.jpg

 

Not many buildings will compete directly with AFT

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The Saving grace is actually Vice?

Gaming seems to be helping out as BPO office demand slows

 

Duterte's Game Changer

Online casinos have given the Philippine market an unanticipated boost.

 

Philippine President Rodrigo Duterte is finding that some vices are good for the markets. His U-turn on online gaming has helped propel the country's benchmark stock index to a surprisingly strong 17 percent return this year.

Soon after taking office last summer, Duterte vowed to stop all online gaming. But speaking recently on the subject, the president -- whose bloody war on drugs has gained worldwide notoriety -- acknowledged he has changed tack. "I really can't stop it," he said. "You better tax them than fight them."

 

As a result, the government is looking at a cash cow. Over the past year, the industry regulator approved 45 online gaming companies that cater only to non-resident gamblers. Already in the first half, the government has collected $58 million in taxes and fees, accounting for more than 10 percent of its revenue from the gaming industry. The companies operate casino websites that offer games via either a streamed live dealer or an electronic random number generator.

Duterte's change of heart makes the Philippines the only Asian country that has a legal framework for online gaming companies.

==

> more: https://www.bloomberg.com/news/articles/2017-08-25/duterte-s-vice-u-turn-proves-a-game-changer-for-stocks

=

"Count office landlords as another major beneficiary. In the first half, online gaming companies accounted for an impressive 30 percent of new office space rented in Metro Manila, helping to cushion a slowdown in demand from outsourcing firms. Last year, the latter accounted for 60 percent of total office rentals. "

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But there's also a warning in that article. Is this sustainable???????????

 

https://www.bloomberg.com/news/articles/2017-08-25/duterte-s-vice-u-turn-proves-a-game-changer-for-stocks

 

Excerpt:

""

And here's the thing about gambling money: It can leave as fast as it comes. Given that Philippine casinos have been implicated in Chinese money laundering, the risk of a reversal may not be negligible.

Investors will have to hope that the online gaming boom isn't just a passing windfall.

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PH to allow entry of 100% foreign-owned investment houses

 

http://business.inquirer.net/235564/ph-allow-entry-100-foreign-owned-investment-houses

 

NEWS
Fully foreign-owned investment houses will be allowed to operate in the country as the government will remove the restriction under the soon-to-be-released latest foreign investment negative list (FINL). Socioeconomic Planning Undersecretary Rosemarie G. Edillon said the Neda Board was expected to approve in a meeting in early September the removal of investment houses and financial investors from the 11th FINL. Every two years, the government releases the FINL, the list of sectors where foreign ownership or participation is limited. The 10th FINL issued by former President Aquino in 2015, through Executive Order No. 184, had practically kept intact the 9th FINL list of activities and sectors restricted to foreign equity and participation. According to EO 184, financing companies and investment houses regulated by the Securities and Exchange Commission were allowed to have up to 60-percent foreign equity participation. The consensus to remove investment houses from the FINL was reached during a recent meeting of the country’s economic managers, who found that there was no constitutional restriction in the ownership of investment houses, Edillon said. “Except if it involves, let’s say, damages or collateral, then it will be subject to constitutional restriction,” Edillon said. The Neda official said certain foreign-owned investment houses had expressed interest to set up shop in the country. As soon as the restriction is lifted, the government hopes to see interested firms to establish presence in the country, Edillon said.
(Source: Philippine Daily Inquirer, 22 August 2017)


Coillers RESEARCH VIEW

The relaxation of foreign ownership restrictions under the foreign investment negative list (FINL) is a step in the right direction as it is expected to spur foreign investments into the Philippines. The easing of foreign ownership restrictions bodes well for the economy in general and the opportunities spill over to other key sectors such as property. The enactment of RA 10641 allowed the entry of foreign banks and this, in turn, contributed to greater office space absorption in Metro Manila. We are optimistic that the government’s decision to allow 100% foreign-owned investment houses to operate in the country should also chip in to office space absorption in the country’s capital. Moving forward, the lifting of foreign ownership cap in a number of economic sectors should also trickle down to residential, retail, and industrial segments.

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Hmm. Interesting

Could be a major breakthrough

Can a 100% foreign owned "Investment House" own mainly Property?

Do you know what income tax rate would apply to the property-related income they earn?

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I am not sure how this will pan out. I would think in terms of real estate that 60%/40% rule may still stick. Also land maybe a no-go. But who knows, perhaps instead of landownership they start offering 50-100 year leases like in Thailand. I wonder if this rule is to attract more equity/fixed income fund managers, banks for savings & loans etc?

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The Global OFFICE SUPPLY numbers are Big, very big

Manila's are big too, but it has an advantage, starting with a very low vacancy rate

On 9/3/2017 at 4:42 AM, Euro Chocozone Buyer said:

‘Are We Overbuilding?’

By: Amy R. Remo - Reporter / @amyremoINQ
Philippine Daily Inquirer / 05:24 AM September 02, 2017

From the second half of 2017 up to the end of 2019, more than 700 million square feet (msf) of office space are expected to be completed and delivered across key cities globally.

This is said to be the equivalent of five good-sized cities like Washington DC, Dallas, London, Singapore and Shanghai, according to global real estate advisor Cushman & Wakefield.

But is there really a demand for such a huge office inventory?

. . . Throughout this global expansion, it is clear that occupiers have generally favored newly-built-high-quality space over older, Grade B and C product. In the United States, for example, newly built space has accounted for 65 percent of all of the office space absorption since 2012,” the report stated.

“Nevertheless, vacancy will generally be on the rise in most cities around world. The development boom will be led by Asia Pacific, particularly Greater China. In fact, nearly 60 percent of the world’s new construction will be concentrated in the Asia Pacific region. Within the region, new supply is concentrated in a handful of markets: Beijing, Shenzen, Shanghai, Manila and Bangalore,” it added.

. . . Manila, in particular, is expected to have 31.5 msf of fresh office space inventory between 2017 and 2019—the fourth highest among 80 cities globally, data from the report showed.

Manila is likewise forecasted to post a higher vacancy of 6.9 percent by the end of 2019, ranking 12th among the 81 cities assessed in terms of having the lowest vacancy rate. It should be noted that in 2016, Manila recorded the lowest vacancy at 2.3 percent among the cities included in the report.

Average rents, however, are expected to grow at a slower pace of 2.1 percent yearly from 2017 to 2019, the report added.

>more: http://business.inquirer.net/236183/are-we-overbuilding#ixzz4rc7RUUSg

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BPI to rebuild head office in Makati
Published April 19, 2018

bpi-60s-70s-main-ayala-office.jpg

BPI's existing Head Office


The Bank of the Philippine Islands (BPI) said on Thursday that plans are afoot to rebuild its head office in Makati City.
In a press conference, BPI president and CEO Cezar Consing said the bank will start demolishing its current building at the corner of Ayala Avenue and Paseo de Roxas in 2019.

“Our plan is towards the end of the year, and we’ve actually started, we’re vacating,” Consing noted.

> http://www.skyscrapercity.com/showthread.php?t=2080761

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Gentry Office - Not Cheap!

The Gentry Corporate Plaza. Premium half floor office (830 sqm) with 7 parking slots at P248M exclusive of other charges.

28059415_943218995828413_699576199751623


1930887_943219039161742_7534265014138242

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OFFICE : "Historical Highs" - Colliers Report on Q2-2018
======

EXCERPTS
Large multinational and knowledge process outsourcing (KPO) firms with plans to consolidate
should consider space within Ortigas, Fort Bonifacio, and the Bay Area as these locations will
likely account for half of new space due to be completed over the next six to 18 months.
Cost-sensitive government agencies and small business es planning to transfer to planning to transfer
to new space should consider buildings in Quezon City.

Vacancy rate
Colliers projects Metro Manila office sector to post a 5% vacancy by end-2018.
Sustained demand should temper the impact of new buildings. Hence, we see vacancy hovering between 5.3%
and 6.0% from 2019 to 2021
Rent
We see lease rates rising by about 8% to 10% per year from 2019 to 2021.
Colliers expects lease rates to rise faster in Makati CBD and its fringes, Fort Bonifacio, and Manila Bay Area

Space& Rents GLA2017: +3yrs: %Chg. : - Q2.2018 : Mid.: YOY chg : Vacancy
Makati-CBD---: 3,227K : 183.7k: +  5.7% : 1200-1700: 1450 : +  9.7% :  1.2 %
Makati-Fringe: 0,255k : 205.3k: +80.5% :
BGC-Ft.Boni.  : 1,917k : 647.5k: +33.8% : 0850-1500: 1175 : + 11.9% :  3.8 %
Ortigas Ctr.--- : 1,645k : 390.1k: +23.7% : 0650-0900: 0775 : + 10.7% :  3.9 %
OrtigasFringe: 0,414k : 101.5k: +24.5% :
Manila Bay--- : 0,409k : 408.4k: +99.9% : 0800-1500: 1150 : + 37.3% :  1.9 %
QC: Prm&GrA: 1,005k : 496.1k: +49.4% : 0650-0950: P800 : +  6.7% :
Alabang-------- : 0,573k : 142.0k: +24.8% : 0650-0750: P700 : +  3.7% :
Other------------ : 0,341k : 245.5k: +72.0% :
Metro Manila: 9,778k : 2,806k: +28.7% :

City HQ, with 19,500 GLA, sqm was the big completion in Makati in Q2.
Overall, 164,000 was added by 7 major buildings in Metro Manila

"Midway through 2018, Colliers recorded a net take up of 641,000 sq m (6.89 million sq ft),
already higher than the 638,000 sq m (6.86 million sq ft) posted for the entire 2017.
For 2018 we expect a little over 1 million sq m (10.7 million sq ft) of net take up,
the highest in Metro Manila's history."

> https://f.tlcollect.com/fr2/418/40215/Colliers_Manila_Office_Q2_2018_FINAL.pdf

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NEW (Cheaper) Areas sought, & Improved transport Needed for some MM areas

 
Offshore gaming to expand outside Manila
Offshore gaming firms are continuously expanding, looking for office buildings with large floor plates. But
vacancy in the country’s capital remains tight, pushing these companies to look for space outside Manila.
Colliers encourages new and expanding offshore gaming companies to look for space in viable sites outside of
Manila such as Cebu, Pampanga, and Laguna.

Mega-Manila-Subway-Route_CNNPH.png

> source: April.2017: http://cnnphilippines.com/news/2017/04/19/Metro-Manila-subway-Mega-Manila-Subway-project-Duterte.html

Improved connectivity in CBDs
The national government has approved the implementation of the Metro Manila Subway Project.
Interestingly, seven out of the 14 stations are in Quezon City with three stations (Mindanao Avenue-Quirino
Highway, Tandang Sora, and North Avenue) targeted for completion by 2022.
Aside from raising land values
around these stations, Colliers sees the subway’s completion resulting in a more pronounced development
of mixed-use communities and office space in the Northern Quezon City area. In our opinion, scouting for
properties in the area of the seven Quezon City stations should be prioritized as these are likely to be completed
by 2025.
Other infrastructure projects that are worth looking into and should improve access to office towers within
CBDs are the Metro Rail Transit (MRT)-7 and Skytrain monorail. The latter is a project developed by Infracorp and should benefit the Upper Bonifacio Township of Megaworld Colliers believes that the construction of public
infrastructure by private developers should also result in the emergence of other sub-locations for office towers,
such as Arca South and Paranaque Integrated Terminal Exchange. Both areas will likely add about 200,000 sq m
(2.1 million sqft) of leasable space to Metro Manila’s stock.

> https://f.tlcollect.com/fr2/418/40215/Colliers_Manila_Office_Q2_2018_FINAL.pdf

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Manila's office rents among APAC's most affordable - Santos Knight Frank

Rick Santos of Santos Knight Frank says, “Manila has the second fastest year-on-year rental growth in Asia Pacific. It also remains as the second most affordable with one of the lowest gross effective rents."

https://www.retalkasia.com/sites/default/files/styles/article-full/public/the_podium_-_west_tower_left_building_0.jpg?itok=E2CJTqWY

According to the Knight Frank AsiaPacific Prime Office Rental Index, Manila's prime office rents are among the Asia Pacific region's most affordable. 

Rick Santos, Chairman and Chief Executive Officer of Santos Knight Frank told WILLIAMS MEDIA, “Manila has the second fastest year-on-year rental growth in Asia Pacific. It also remains as the second most affordable with one of the lowest gross effective rents.”

At a glance:

  • Strong demand for prime office rents rose by 10.6% YOY during Q2 2018.
  • Manila market has the second lowest gross effective rent of PHP 1,178 (USD 22)
  • Manila saw prices increase 2.4% QOQ with robust BPO demand.
  • Vacancy in Manila decreased to 4.5% from 4.9%.
  • 60% of 1.47 million sqm of new office supply already pre-committed. 

Strong demand for prime office space in Metro Manila has propelled rents to rise by 10.6 per cent year-on-year (YOY) during the second quarter of 2018.

Despite the increasing rent, the market remains one of the most competitive in the region by having the second lowest gross effective rent of PHP1,178 (USD 22), according to an analysis by the country’s leading commercial real estate service provider Santos Knight Frank. 

santos_knight_frank.jpg
Source: Santos Knight Frank

Manila, which was second after Sydney in YOY rental growth, saw prices increase by 2.4 per cent quarter-on-quarter (QOQ) as demand from the Business Process Outsourcing (BPO) sector remains robust.

Vacancy in Manila slimmed down to 4.5 per cent, coming from 4.9 per cent in the first quarter of the year. In total, about 60 per cent of the 1.47 million square metres of new office supply in the rest of the year is already pre-committed.

“Strong demand for office space in Manila continues. The overall office vacancy rate – currently 4.5 per cent - continues to contract, which is a positive sign.”

Santos Knight Frank forecasts that the expansion of BPOs in the Philippines will continue not only in the capital but also in the provinces as investors capitalize on favourable demographics, affordable rent, strong macroeconomic fundamentals and the strength of the dollar.

> MORE: https://www.retalkasia.com/news/2018/09/28/manilas-office-rents-among-apacs-most-affordable-santos-knight-frank/1538088916?utm_source=retalkasia_weekly&utm_medium=newsletter&utm_campaign=[campaign_title]_09/29/2018

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Business World article: Office Rents "to rise an estimated 9% in 2019" (per Colliers)

#1> in: The near future of Philippine office space / BW: https://www.bworldonline.com/tag/property/

NOTES:

+ Positives: Continued strong economic growth, growing consumption, ongoing infrastucture development

+ Takeup: Additional supply of 1 million sqm+; est. net takeup of 900k sqm in 2019 = 5.3% vacancy at year-end

+ "Flexibility will be the name of the game": flexible co-working spaces (+10%pa+?), planned communities, catering to POGO.

Flex is capable of bringing down costs for employers, since it caters to a "more mobile work force"

Policy reforms may help to improve the business climate
+ Property hotspots (like: Clark Freeport, Cebu, Laguna) also show rising Office demand, incl. from POGO
+ POGO/offshore gaming may occupy 280k sqm, or 25% of total space absorbed
+ Like Greater Manila, Cebu will be a big beneficiary of infrastructure investments nts

#2> in: A robust local office market / BW:

In 2018: 32 new office buildings with 845k sqm were completed in Greater Manila (says Pronove Tai Int'l)

= YrEnd TOTAL: 10.6 Million sqm, Greater Manila
   + Makati City :   3.4 Million sqm (32%) 0.6 Million sqm, Greater Manila
   + Taguig.       :    2.2 Mn sqm ( 21%), delivered 280k sqm pa, over last 4 yrs
   + Ortigas.      :    1.7 Mn sqm ( 16%)
   TAKE-UP       =   1.1M sqm in 2018, Up from 875,000 sqm, in 2017 sqm, in 2017
Top Drivers
   + IT, BPO.      : + 490k  (+46%)
   + Traditional : + 312k , and was up 67% from 2017
   + POGO.       ;  + 229k,

Vacancy rates: Tight overall
Overall Metro Manila = 4% (5-7% in "normal")
But only 1% in Makati City and Ortigas
Muntinlupa City 3%
Taguig / BGC : 7%, thanks to rapid growth in supply
Bay Area/ Pasay/ Paranaque :   0.4% vacancy, with Rents up 19% you
QuezonCity, & Mandaluyong :  13%, 10% vacancies

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OFFICE SUPPLY CRUNCH SEEN

Mostly for PEZA spaces.  The number of Offshoring & Outsourcing cos’ looking to come to PHP
Is rising faster than PEZA approved office spaces.
This is “not good for industry,” says Mr Andaya of Colliers Int’l.
+ Very low vacancy rates in Makati and Manila Bay are constricting expansion by tenants.
+ Office take-up in Q1-2019 was only 72.2k sqm, versus 417k sqm in Q1-2018
+ Colliers expects higher take-up in q2-Q4, based on anticipated office completions
- Business Insight, 5/23

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