WHY BONIFACIO

GLOBAL CITY IS
THE NEXT CBD
AUGUST 2015
A Cushman & Wakefield Research Publication
 WHY BONIFACIO
GLOBAL CITY IS THE
WHY WE THINK BONIFACIO GLOBAL CITY IS NEXT CBD

THE NEXT CENTRAL BUSINESS DISTRICT

In the span of a decade, the Bonifacio Global City has arguably become the premier BONIFACIO MAKATI
business address in the country apart from Makati central business district (CBD). GLOBAL CITY CBD
And while the latter remains as the main CBD of the country, it is difficult to deny
the rise to prominence of Bonifacio Global City.
Bases Conversion and Development
Authority (BCDA) and Fort Bonifacio
Bonifacio Global City has exhibited strong agglomeration of businesses and Development Corporation (Ayala Land, Inc. OWNER/DEVELOPER Ayala Land, Inc.
unprecedented construction of office buildings in recent years. This is supported by and Evergreen Holdings, Inc.)
the positive growth trajectory of market indicators, with office rentals and selling
prices of the district poised to outperform that of Makati CBD. Finally, the recent
announcement of the Philippine Stock Exchange (PSE) plans to move from the 400 hectares LAND AREA 170 hectares
Makati CBD and to Bonifacio Global City serves to validate the importance of the
district as an upcoming business hub. These factors altogether hint at the potential of
Bonifacio Global City to become a CBD.
We foresee two scenarios for the transformation of the district into a CBD. First is 2003 COMPLETION DATE 1960
that the district will eventually form part of the Makati CBD and become a collective
CBD. This is a possible scenario resulting from the ownership issue of Bonifacio
Global City and reinforced by its close proximity to Makati CBD. We liken this
900,000 square meters 1.2 million square meters
scenario to the evolution of the Singapore CBD which has continually expanded STOCK AS OF 1H 2015*
(9.7 million square feet) (12.9 million square feet)
from Raffles Place and now towards Marina Bay.
The second one, which we find plausible and will be the subject of this research
piece, is that the district will evolve as a separate and distinct CBD alongside Makati 1.9 million square meters PROJECTED STOCK 1.3 million square meters
CBD. Unlike Makati CBD, which we foresee to remain dominated by established local (20.5 million square feet) BY 2018* (14.0 million square feet)
conglomerates and existing MNCs, we foresee Bonifacio Global City to corner a mix
of knowledge process outsourcing (KPO) industry and new corporate occupiers.
This is similar to the emergence of various CBDs in India such as New Delhi, PHP1,034 per square meter PHP1,200 per square meter
OCCUPANCY COST
Gurgaon, and Mumbai, with each area having their respective defining characteristic per month (USD2.1 square per month (USD2.5 square
AS OF 1H 2015*
as a CBD. New Delhi serves as a government center, Gurgaon serves as an IT center, feet per month) feet per month)
and Mumbai serves as a financial district.
AVERAGE AGE OF
4.4 years 12.4 years
BUILDINGS*

*Refers to Prime and Grade A buildings only

CUSHMAN & WAKEFIELD 3

 WHY BONIFACIO
GLOBAL CITY IS THE
WHY WE THINK BONIFACIO GLOBAL CITY IS NEXT CBD

THE NEXT CENTRAL BUSINESS DISTRICT WHAT MAKES A CENTRAL

GROWING SHARE OF OFFICE potential of the district to be host to KPO
BUSINESS DISTRICT? 1

LOCATORS LED BY KPOS AND and new corporate entrants. Financial

CORPORATE OCCUPIERS services firms such as Aboitiz Equity
Ventures, EastWest bank, Maybank,
Bonifacio Global City was initially
Philamlife, Prulife UK, and Sunlife;
dominated by business process outsourcing
professional services such as, CVC Law, Del
(BPO) firm but there has been a gradual
Rosario & Del Rosario Law, McCann
shift in the occupier profile of the district
Erickson, and Ogilvy & Mather; consumer
due to the entry of knowledge process
goods and telecommunications firms such
outsourcing (KPO) firms and the solid
as Bench, Coca-Cola, and Globe, have
influx of corporate occupiers from financial
established their corporate headquarters in
services, professional services, and
the district. Meanwhile, upcoming
consumer goods industries, among others.
corporate occupiers in the district include HIGH DENSITY OF DEVELOPMENTS PREMIUM ON RENTS AND PRICES
The district is host to several KPO firms, Citibank, Metrobank, Unilever, and PSE,
most of which are captives or back offices among others.
led by MNCs such as Deutsche Knowledge
The movement of the aforementioned
Services (DKS), HSBC, and JP Morgan
firms into the district is seen as a flight-to-
Chase & Co. These companies provide
quality response since a good number of
higher value services as they operate and/
the aforementioned companies were
or have similar functions as their traditional
previously located in old office stock in
office counterparts. There is also an
fringe areas of Metro Manila. In addition,
increasing number of new information
the limited available new office space that
technology (IT) companies (engaged in
could cater to modern office requirements
mobile application development, among
and higher occupancy costs in Makati CBD
others) in the district which suggests the
have further enhanced the appeal of
potential of the district to become a
Bonifacio Global City to prospective
KPO-IT hub.
tenants. This trend is projected to continue
There is also an increasing share of given the forecast stable office demand
corporate occupiers in the Bonifacio from the BPO industry and record level
Global City which supports our view of the upcoming stock in Bonifacio Global City.

ENTRY OF SIGNIFICANT FIRMS IN BGC

CONCENTRATION OF BUSINESS
/ ECONOMIC ACTIVITIES

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

UPCOMING ICONIC LANDMARKS ACCESSIBILITY

1
There is no formal definition or description of what makes a CBD in the Philippines, hence, the paper made reference to urban development theories and
models to provide qualitative CBD attributes that characterizes Makati CBD. The attributes presented are considered equal in weight in terms of determining
4 whether an area can be considered a CBD.
 WHY BONIFACIO
GLOBAL CITY IS THE
NEXT CBD

SIGNIFICANT SUPPLY EXPANSION CUMULATIVE OFFICE STOCK OF BONIFACIO

ON THE BACK OF HEALTHY
DEMAND GLOBAL CITY VS MAKATI CBD AND OTHER AREAS
As of the first half of 2015, office stock in
Bonifacio Global City stood at almost
900,000 square meters (9.7 million square Bonifacio Global City Makati CBD Other Areas
feet), placing second behind Makati CBD.
More than100,000 square meters (1.1
million square feet) of office space was
completed in the district annually in the
last 5 years, on average. By 2016, we
project office stock in the district to reach 2001 2002 2003 2004
1.4 million square meters (15.1 million
square feet), outpacing Makati CBD by
nearly 17%.

The gap is forecast to widen as new office

buildings in the district come online. This is
supported by the remaining number of 2005 2006 2007 2008
undeveloped areas and a number of parking
lots that may eventually be converted into
buildings. There are also areas of the
district which are currently under long
term lease and may be source of new office
stock. The district is expected to lead all
Metro Manila submarkets by 2018 where it 2009 2010 2011 2012
will reach close to 2.0 million square
meters (21.5 million square feet) and
account for around 26% of the entire
Prime and Grade A office stock in the
region.

RISE OF ICONIC DEVELOPMENTS 2013 2014

2015-2018
2015
Unlike other districts, boutique office FORECAST
developers such as Daiichi Properties, (sqm)
Super Prime Holdings, Inc., The Net Group,
and W Offices, Inc. account for majority of
the existing stock in Bonifacio Global City.
1.35
This has created a good competitive 0.9M M
environment where there is more diversity
and dynamism among office buildings in the

5M
THE FINANCE CENTRE

1.8
district.

0.4

This is observed with the increasing
emphasis on both building specifications
and designs of office buildings in the area.
Daiichi Properties hired Gensler to design
The Finance Centre while the Net Lima
building by The Net Group was designed by
Chad Oppenheim. The district is also host
to an increasing number of Building for
M
Daiichi Properties
Headquarters and the Sunlife Center are continue to attract prospective and existing
some of the LEED certified buildings in the firms to locate in the district. This is 2016 2017
0.0M
4.5M 2018 2.25M
district. Altogether, these buildings serve as reinforced by the fact that some firms
potential iconic landmarks that elevates the consider their building and address as a
profile of Bonifacio Global City. reflection of their corporate image which
serves an incentive to locate in Bonifacio

M
5.0

2.7
Ecologically Responsive Design Excellence The combined presence of iconic
Global City.

(BERDE) and Leadership in Energy &
Environmental Design (LEED) certified
buildings. Net Lima is the flagship project
for BERDE, while Globe Telecom
5M
landmarks and the appeal of Bonifacio
Global City, not least because of its 3.6M M
3.15
masterplanned community and state-of-
the-art facilities, serve as a magnet that may
*Refers to Prime and Grade A buildings only

6 2
BERDE is the National Voluntary Green Building Rating System in the Philippines developed by the Philippine Green Building Council (PHILGBC). CUSHMAN & WAKEFIELD 7
 WHY BONIFACIO
GLOBAL CITY IS THE
NEXT CBD

LAND VALUES 400

OF BONIFACIO 350

GLOBAL CITY AND 300

Land Values Index (2010=100)

MAKATI CBD 250

200

150

100

50

0
2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Bonifacio Global City Makati CBD

Source: Cushman & Wakefield Research

RENTAL RATES 200

OF BONIFACIO 180

GLOBAL CITY AND 160

MAKATI CBD
140

Rental Index (2010=100)

120

LAND VALUES, RENTALS, AND either district. The JAKA Tower acquisition Global City have also posted solid capital 100

SELLING PRICES ALMOST AT THE
SAME LEVELS AS THAT OF MAKATI
CBD
Investment interest in the country remains
strong despite the lower-than-expected Q1
2015 growth as prospective and existing
foreign investors remain keen on riding the
projected growth of the local property
market, particularly in Makati CBD and
Bonifacio Global City.
Since land transactions are few and far
by Ayala Land, Inc. in 2014 illustrate this appreciation due to strong investor take up. 80
point. The aforementioned deal is estimated This is reflected in the limited available
60
to be north of at least Php400,000 per units among upcoming strata-title office
square meter (USD826 per square feet) buildings and with select existing buildings 40
which is in line with the PHP480,000- opening some of their office floors for sale 20
500,000 per square meter (USD991-1,033 in the market. Again, the presence of new
Note: Only refer to rents of existing Prime and 0
per square feet) bid price of the two office stock has buttressed prices in the 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Grade A office spaces (as of June 2015)
Government Service Insurance System district. Bonifacio Global City Grade A Makati CBD Prime Makati CBD Grade A
(GSIS) lots in Bonifacio Global City. Source: Cushman & Wakefield Research
These indicators show that price and rental
Makati CBD has always commanded higher performance in Bonifacio Global City may
rents, owing to the presence of Prime outperform that of Makati CBD moving
grade buildings in the district . However, forward. These only illustrate the strong CAPITAL VALUES 250

between, pricing for Bonifacio Global City

and Makati CBD are determined somewhat
the rental gap for Grade A offices between demand for the district and that Bonifacio OF BONIFACIO
Bonifacio Global City and Makati CBD has Global City is poised to be the most
GLOBAL CITY AND
200
arbitrarily. In particular, it has become a
been steadily narrowing, especially with expensive district within Metro Manila.
generally accepted convention for owners/

Capital Values Index (2010 =100)

sellers to benchmark asking land prices on
strong take-up of new buildings in the
latter. As of end-2014, Grade A average
MAKATI CBD 150
recent comparable transactions from
asking rents of existing office buildings in
Bonifacio Global City are observed to be 100
slightly higher than that of Makati CBD.

Selling prices of office units in Bonifacio 50

0
Note: Only refers to prices of existing Prime and 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
Grade A office spaces (as of june 2015) Bonifacio Global City Grade A Makati CBD Prime and Grade A

Source: Cushman & Wakefield Research

8 There are five (5) existing Prime grade office buildings in the country. These are Philamlife Tower, Ayala Tower One and
3
CUSHMAN & WAKEFIELD 9
Exchange Plaza, RCBC Plaza, and Zuellig Building.

SUMMARY AND KEY ISSUES
The preceding discussion is encouraging as
it confirms how Bonifacio Global City
embodies some of the CBD attributes
outlined at the beginning of this report.
Even so, the district still has untapped
potential.
There is still a good number of ongoing
construction and undeveloped lots in
Bonifacio Global City, which when
combined with healthy demand for the
area, points at the growth of critical mass
in the district. This healthy leasing and
investment demand is supported by the
positive outlook on the Philippines (and
Asia Pacific as a whole) and the forecast
sustained growth of the Philippine BPO
industry. There is also a lack of available
assets for investment in Bonifacio Global
City as majority of upcoming strata-title
offices in the district have limited
availability while local developers continue
to be aggressive with their land banking
and enhancing their portfolio of real estate
assets.
While all of these are looking positive for
Bonifacio Global City, we also identified key
considerations that may likely impact its
development as a CBD. These are the (1)
accessibility of the district; and (2) the
Makati redevelopment.
ACCESSIBILITY
The Bonifacio Global City district is
generally accessible due to its several
access points such as the C-5 Road,
McKinley Road (going to EDSA), Lawton
Road (going to C-5 or Pasay City), and
Kalayaan Avenue. Nonetheless, the
increasing density of developments within
Bonifacio Global City and relatively poor
infrastructure in Metro Manila have
10 4
One of the main rapid transit system of Metro Manila connecting several districts from Quezon City to the City of
WHY BONIFACIO
GLOBAL CITY IS THE
NEXT CBD
REVITALIZING
MAKATI CITY
affected traffic conditions in the district. REDEVELOPMENT OF MAKATI CBD
This may worsen if left unaddressed,
The redevelopment of Makati CBD by
especially if and when the district becomes
Ayala Land, Inc. (ALI) is aimed to invigorate
fully developed.
the district and maintain its position as the
Accessibility has become a concern among principal central business district of the
employers and commuting employees in
the district. Depending on location,
country. The key areas of the
redevelopment project include the Ayala
REDEVELOPMENT PLAN
individuals find it difficult to commute to Center, Ayala Triangle, City Gate, and
PHP65BILLION
and from Bonifacio Global City especially Circuit Makati. We have also observed
PHP60 3,700 5
during rush hours. This may be attributed several refurbishment and redevelopment
to the increasing workforce in the district of existing buildings along Ayala Avenue of additional investment translating to:
such as the SLC building, Discovery Primea,
combined with limited options and
availability of public transport. This is and more recently, the Insular Life Building. BILLION
investment 800,000sqm residential
units
Hotels
evidenced in the long queues and waiting
times in formal public terminals and nodes
The first phase of the redevelopment plan in 2012 of office and retail space
was completed in 2012 with the reopening
within the district. The Fort Bus is currently
of the Glorietta 1 and 2 which included
the main mode of access within the district.
BPO offices and the Holiday Inn hotel. An
Taxis and public utility jeepneys are also
additional PHP65 billion was infused in
available, however, jeepneys are limited to
2014 as Ayala Land, Inc. plans to add
select thoroughfares only. It is worth noting
around 800,000 square meters (8.6 million
that the online taxi and car booking
square feet) of new office and retail space, CIRCUIT MAKATI JAKA
platforms such as GrabTaxi and Uber have • 22-hectare entertainment TOWER
3,700 residential condominium units and
become popular alternative modes of complex, which will include
five (5) new hotels.
transportation within the district. Bonifacio offices, residential
condominiums, high street type Unfinished JAKA project that
Global City also has no direct access to the The completion of these developments are Ayala will turn into a strata-
retail, and performance venue
Metro Rail Transit (MRT) 3 which also projected to address pent up demand (due • Completion: 2018/2019 title building
COMPLETION: TBC
affects its appeal towards prospective to supply constraints) for the Makati CBD.
employees. Again, if left unaddressed, this is This may affect demand for office buildings
CITY GATE INSULAR
expected to pose a threat to the growth of in Bonifacio Global City especially since
• 2.2-hectare mixed-use area that
LIFE
the district especially once it becomes fully development direction may shift north, BUILDING
will include offices,
developed. away from the district and towards the condominiums, hotel, civic space,
Circuit Makati and City Gate area. and elevated walkway to Ayala Renovation and enhancement
The proposed Mass Transit System Loop
Conversely, these developments may also Center plans in progress
that will connect Bonifacio Global City, • Completion: 2018/2019 COMPLETION: 2017
create spillover demand for Bonifacio
Makati CBD, and the Mall of Asia complex
Global City and further improve its
may help address this. There are two
position to become a CBD. DISCOVERY
options for the planned route within AYALA TRIANGLE PRIMEA
Bonifacio Global City, first is via 32nd GARDENS
Street which will have stations in Market! • Ayala Tower 2 and new
Mandarin Hotel 68-storey luxury residences
Market! and St. Luke’s Medical City; and the • Completion: 2018 (office) and (former site of Gilarmi
second one is via 26th Street which will 2020 (hotel) Apartments)
have stations in Market! Market!, McKinley COMPLETION: 2015
Parkway, and 5th Avenue. The Public-Private
Partnership (PPP) project is currently still AYALA CENTER HOTEL
INTERCON-
• Redevelopment of existing
pending approval from the National TINENTAL
shopping center to mixed-use
Economic Development Authority (NEDA). development and new residential
and hotel projects Area targeted for a 10,000
• Completion: Phase 1 – 2015 sqm business convention
• Phase II – TBC center
COMPLETION: TBC
MCKINLEY EXCHANGE MCKINLEY
• Planned transport hub, with EXCHANGE
CORPORATE
office and retail components CENTER
• Completion: Q1 2015
5-storey mixed-use complex.
part of transportation hub
COMPLETION: 2015
CUSHMAN & WAKEFIELD 11
Manila. The train system is parallel to EDSA which is the main thoroughfare of Metro Manila.
 WHY BONIFACIO
GLOBAL CITY IS THE
OUTLOOK NEXT CBD

The path towards becoming a CBD

certainly looks promising for Bonifacio
Global City. This is evident with how the
district has become comparable to Makati
CBD as market activity and indicators
suggest.

While there are similarities between the

two districts, there are also stark
differences between them which enables
them to complement one another and
create opportunities for further growth.
Majority of the local conglomerates and
existing MNCs may opt to remain within
Makati CBD while new corporate
occupiers may prefer to locate within
Bonifacio Global City. Given all of these, it’s
only a matter of time before Bonifacio
Global City can emerge as the next CBD.

JANLO DE LOS REYES

Manager – Philippines
Research & Consultancy

T +63 (02) 554 2927 local 126

M +63 (998) 557 1737
F +63 (02) 554 2941
janlo.delosreyes@ap.cushwake.com

12 CUSHMAN & WAKEFIELD 13

www.cushmanwakefield.com