COLLIERS SEMI-ANNUAL RETAIL | MANILA | RESEARCH | Q4 2019-Q1 2020 | 30 APRIL 2020

Joey Roi Bondoc

Senior Manager | Research |
EXPANDING ONLINE STRATEGY AMID COVID-19
Philippines Mall operators and retailers tweak strategies to respond to challenges posed by the global pandemic
+63 2 8858 9057
Joey.Bondoc@colliers.com

2020–22
Insights & Q4 2019-Q1 2020 Full Year 2020 Annual Average
Recommendations > We expect muted absorption of retail space
in 2020 due to reduced consumer spending
The slowdown of the country’s and implementation of social distancing. An
69,800 50,700 275,700
economy, erosion of consumer Demand economic rebound in 2021 is likely to help
sq metres sq metres sq metres
confidence as well as boost retail spending.
implementation of physical > Colliers expects slower completion of retail
distancing measures are likely to space due to work stoppages following the
adversely impact retail demand in imposition of the ECQ* in Luzon. New supply
Metro Manila. As a result, we see Supply is likely to recover slightly in 2021 and 2022 120,200 108,300 351,900
vacancy rising in 2020 before a as developers hasten mall development in a sq metres sq metres sq metres
slow recovery in 2021 and 2022. scramble to recapture demand.

To seize upon opportunities

presented by improved market
Annual Average
sentiment, we encourage mall Q4 2019-Q1 2020 / YOY / Growth 2019–22 /
operators to: End Q1 End 2020 End 2022

˃ Line up marketing efforts to > Colliers sees rents declining in 2020 due to
slower consumer spending brought about by 0.0% -5.0% -2.3%
recapture demand once the
pandemic wanes the economic slowdown and dip in
Rent remittances from Filipinos working abroad.
˃ Provide short-term rental relief PHP1,628 PHP 1,549 PHP 1,518
We project a slow recovery in rents in 2022.
measures to support retailers
˃ Ensure maximum hygiene > Colliers projects a rise in vacancy in 2020 as
+0.2pp +2.2pp +0.6pp
standards in malls households are likely to skimp on non-
essential retail. The rise in vacancy is likely to
Meanwhile, we recommend that be tempered by a slower delivery of new
Vacancy 10.0% 12.0% 11.5%
retailers expand their online retail space in 2020 and 2021.
presence and target the elderly.
Source: Colliers International. Note: USD1 to PHP51 as of the end of Q1 2020. 1 sq metres = 10.76 square ft. Note: Regional malls have a gross leasable area of
between 50,000 sq metres (538,000 square feet) to 99,999 sq metres (1.08 million square feet). *ECQ = Enhanced Community Quarantine
COLLIERS SEMI-ANNUAL RETAIL | MANILA | RESEARCH | Q4 2019-Q1 2020 | 30 APRIL 2020
RECOMMENDATIONS
Expand offline-to-online strategies
Physical malls have felt the immediate pinch brought about by the
government’s imposition of an ECQ in Luzon and social distancing measures
due to the COVID-19 pandemic. The ECQ forced malls to close, with only the
stores supplying essential items such as groceries, medicines, and food for
delivery open during the ECQ. Colliers believes that social distancing is likely
be part of the new normal even if the government lifts the ECQ on May 16.
Hence, a significant number of physical retail shops are likely to remain
closed for additional time. However, brick-and-mortar retailers are trying to
tap the demand by expanding their online presence. Colliers expects more
retailers to create their own e-commerce sites, utilize the existing sites of Source: Colliers International
major mall operators, or use popular social media sites such as Facebook and
Instagram.
In our opinion, these expanded online strategies should also target the
elderly, who are among the most vulnerable segment of the population
during the pandemic but are now actively embracing online shopping.
Expanded partnerships with logistics firms
The social distancing measures have been compelling consumers to rely
heavily on deliveries. Mall operators and retailers should consider firming up
partnerships with delivery companies that have modernized warehouses and
efficient logistics systems to maximize their shift from brick-and-mortar to
online selling.
Improve marketing efforts to recapture demand
Colliers believes that the ECQ and the travel restrictions imposed are likely to
lead to a decline in retail footfall among malls in Metro Manila. In our
opinion, mall operators should line up their marketing efforts now to
recapture demand once market conditions improve.
Provide short-term relief measures and highlight sanitation
Colliers encourages mall operators to provide short-term rental relief
measures. Luxury retail, for instance, was adversely affected by the 40%
reduction1 in foreign arrivals in the first two months of 2020. This retail
segment was also affected by the slower influx of new offshore gaming
1Ibanez, J. & Villegas, V. DoT maps counter-virus measures.
Upcoming tenant composition, 2020-2021
Technology and Entertainment
6%
Accessories
11%
Miscellaneous Goods Food & Beverage
13% 38%
Beauty and Wellness Clothing
16% 17%
employees during the period. Colliers believes that malls should also
ensure hygiene standards through adequate ventilation and sterilization.
COMPLETION TO SLOW DOWN
From Q4 2019 to Q1 2020, about 120,200 sq metres (1.3 million square
feet) of new retail space was completed. This raised Metro Manila’s retail
stock to 7.2 million sq metres (77.4 million square feet) by Q1 2020.
Colliers saw the completion of Megaworld’s Alabang West Parade,
Filinvest’s The Crib Mall, 8990 Holdings’ Deca Mall Tondo and Assembly
Grounds at the Rise in Makati fringe during the period under review.
Colliers sees the completion of new malls for the remainder of 2020 being
delayed by work stoppage across Metro Manila. We now expect the
delivery of a couple of malls to be pushed back by three to six months.
From our initial estimate of 1.2 million sq metres (12.9 million square feet)
of new leasable supply from 2020 to 2022, we now see a 20% reduction in
delivery or close to about 1.0 million sq metres (10.8 million square feet) of
new space during the period.
Among those due to be completed from 2020 to 2022 are Gateway Mall 2,
Mitsukoshi Mall, One Ayala Retail, SM City Grand Central, and the
expansion of Ayala Triangle retail.
COLLIERS SEMI-ANNUAL RETAIL | MANILA | RESEARCH | Q4 2019-Q1 2020 | 30 APRIL 2020

Colliers has observed that among the new malls likely to open from 2020 to
2022 are those within integrated communities or adjacent to office towers in Metro Manila retail vacancy, 1991-2022
major business districts that cater to the essential needs of nearby residents
and employees. We also see these malls benefiting from the government’s 800K New Supply Vacancy at Year-End (RHS) 20%
projected economic rebound in 2021 and 2022 which should partly raise
consumer confidence and purchasing power. 600K 12% 15%

New supply and submarket % of total supply, Q4 2019 - Q1 2020 400K 10%

200K 108K 5%

25K | 20% Manila 0 0%

76K | 52%

1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021F
• Deca Mall Tondo Ortigas Center
• Estancia Expansion
Source: Colliers International
Makati Fringe
Alabang
Studies by the Asian Development Bank (ADB)2 and the Philippine central bank
7K | 6% 12K | 10%
show that more than 90% of remittances received by Filipino households are
• Assembly Grounds at The Rise • Alabang West Parade spent on basic needs such as food, fueling retail consumption. The central
• The Crib Mall bank also downgraded its remittance growth forecast3 for 2020 to 2% from
Source: Colliers International
the previous 3% before the onset of the COVID-19. This is likely to erode

VACANCY TO INCH UP consumer purchasing power and confidence. Data from the central bank show
that remittances are affected by regional and global financial crises. During
the Asian Financial Crisis, remittances dropped to USD6 billion in 1999 from
Metro Manila’s retail vacancy rose slightly to 10% in Q1 2020 from the 9.8%
USD7.4 billion in 1998. During the global economic turmoil, remittance growth
in Q3 2019. The rise in vacancy was marginal as the smaller neighborhood
slowed to 6% in 2009 after a 14% increase in 2008. In our opinion, the
malls (25,000 sq metres or 269,000 square feet and below) that opened
recovery of retail demand in 2021 hinges on the pace of expansion of
during the period were almost fully occupied. Meanwhile, a new regional
Philippine and global economies.
mall’s space was significantly taken up by a department store, personal
accessories and wellness shops, and a couple of food and beverage (F&B)
retailers. RENTS TO DECLINE IN 2020; SOFT
Colliers believes that even with a partial lifting of the ECQ on May 16, most
Metro Manila consumers are likely to limit spending to essentials, including REBOUND IN 2021-2022
groceries, medicines, and F&B for delivery. The continued implementation of
Colliers projects a 5% decline in rents in 2020 as mall operators scramble to
social distancing measures by the government is likely to result in a
retain their current tenant mix and provide short-term relief measures to
calibrated and gradual opening of retail spaces in the capital region. Given
retailers affected by the Luzon lockdown. We see average rents declining 2%
the profile of upcoming retailers in 2020, Colliers estimates that only about
in 2021 before a slight recovery (+1%) in 2022. An improving macroeconomic
50% of new leasable space due to be completed in the next 12 months is
environment and consumer confidence by the end of 2021 should result in at
likely to be absorbed, raising Metro Manila’s vacancy to 12% by the end of
least a minor rise in rental rates as mall operators and retailers re-capture
2020.
pent-up retail demand.
2Jha,S., Sugiyarto, G. & Ang, A. Remittances and Household Behavior in the Philippines.; 3Noble, L. BSP cuts
outlook for remittance growth to 2%.
Primary Author: For further information, please contact:
Joey Roi Bondoc David A. Young
Senior Manager | Research | Philippines Chief Operating Officer | Philippines
+63 2 8858 9057 +63 2 8858 9009
Joey.Bondoc@colliers.com David.A.Young@colliers.com

Contributors: Richard Raymundo

Managing Director | Philippines
Donica Cuenca +63 2 8858 9028
Research Analyst | Research | Philippines Richard.Raymundo@colliers.com
+63 2 8858 9068
Donica.Cuenca@colliers.com

Martin Aguila
Research Analyst | Research | Philippines
+63 2 8863 4116
Martin.Aguila@colliers.com

About Colliers International

Colliers International (NASDAQ, TSX: CIGI) is a leading real estate professional services and investment management company. With operations in 68 countries, our more than
15,000 enterprising professionals work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For
more than 25 years, our experienced leadership, owning approximately 40% of our equity, has delivered compound annual investment returns of almost 20% for shareholders. In
2019, corporate revenues were more than $3.0 billion ($3.5 billion including affiliates), with $33 billion of assets under management in our investment management segment. Learn
more about how we accelerate success at corporate.colliers.com, Twitter or LinkedIn

Copyright © 2020 Colliers International

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it.
No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
 COL L IERS QUARTERL Y
Joey Roi Bondoc
Senior Manager | Research | Philippines
+63 2 8858 9057
Joey.Bondoc@colliers.com
Dom Fredrick Andaya
Director | Office Services | Philippines
+63 917 831 6725
Dom.Andaya@colliers.com
OFFICE | MAN IL A | RESEARCH | Q1 2 0 2 0 | 3 0 APRIL 2 0 20
HOW LANDLORDS & TENANTS
SHOULD REPOSITION POST-PANDEMIC
Opportunities for Metro Manila office stakeholders as market recovers post-COVID19
2020-22
Insights & Q1 2020 Full Year 2020 Annual Average
Recommendations > Less inspection activity should result in lower
take-up in H1 2020. Assuming market
sentiment improves in H2 2020, Colliers sees
Colliers sees higher office
vacancy in 2020 due to a Demand demand from traditional† and outsourcing 116,100 sq m 594,000 sq m 852,700 sq m
slowdown in leasing activities tenants recovering sharply in 2021.
following the adverse impacts of
the pandemic and lockdown in
Luzon. Economic analysts1 and > Work stoppage due to the lockdown is likely
to push back completions by around one to
the head of the Philippine central
two quarters. New supply will likely start
bank are expecting a recovery in
Supply rebounding in 2021, partly including the 93,500 sq m 784,700 sq m 896,100 sq m
2021 and this should support deferred completions in 2020.
expansion of business activities
and leasing deals.
Colliers recommends that Annual Average
QOQ/ YOY/ Growth 2019–22/
landlords highlight their property End Q1 End 2020 End 2022
management capabilities;
> With the rise in vacancy, Colliers sees the
proactively attract non-POGOs*
office market shifting to a tenants’ market. +0.5% -17.0% -3.3%
and work with existing and With greater leeway for rent negotiation and
potential tenants in providing concessions, we see rent declining in 2020
Rent
flexible lease terms. before recovering in 2021. PHP1,029 PHP850 PHP910
Meanwhile, tenants should adopt
modern technology and a flex > Colliers sees vacancy rising in 2020 due to
and core strategy; revisit business -0.2pp +1.2pp +0.0pp
sluggish leasing all over Metro Manila. The
continuity plans; and revisit rise is likely to be tempered by less supply
CBD** buildings that may now this year but vacancy is likely to drop in 2021 Demand
Vacancy 4.1% 5.5% 4.4%
offer more flexible terms. due to a sharp rise in demand.
Source: Colliers International. Note: USD1 to PHP51 as of the end of Q1 2020. 1 sq m = 10.76 sq ft. *Also known as Philippine Offshore Gaming Operators (POGOs),
primarily offshore gaming firms from China. **Also known as Central Business Districts (CBD). †Traditional (includes companies in various sectors such as legal,
engineering and construction, government agencies and flexible workspace operators), POGO, and outsourcing firms. 1Padin, M. Government to boost infrastructure
spending to cushion COVID impact.
COL L IERS QUARTERL Y OFFICE | MAN IL A | RESEARCH | Q1 2 0 2 0 | 3 0 APRIL 2 0 20
RECOMMENDATIONS
Work with existing tenants to provide flexible lease terms
With work stoppage in traditional offices and partial operations in most
outsourcing companies, Colliers encourages landlords to provide short-
term relief measures to occupiers such as deferment of rent covering the
enhanced community quarantine (ECQ) period. This is particularly
important for micro, small, and medium enterprises (MSMEs) that have
been hit the hardest.
Maximize wellness features and property management
capabilities
Colliers believes that landlords should maximize wellness features of their
buildings and prioritize wellness certifications such as Leadership in
Energy and Environmental Design (LEED) and WELL building standards.
LEED buildings will likely account for 30% of new office supply from 2020
to 2022. Landlords should also be more discerning with design
considerations (e.g. proper air circulation, more office space for
employees, and glass ratio for natural sunlight) and strengthen property
management capabilities including sanitation (e.g. implementation of
measures to avoid transmission) and emergency preparedness.
SUPPLY TO REBOUND IN 2021
In Q1 2020, Metro Manila’s office supply increased by only about 93,500 sq
metres (1 million sq feet), bringing total office supply in the capital region to
about 12.0 million sq metres (129 million sq feet). This is the lowest office
completion recorded since Q3 2015. The full impact of the ECQ on supply will
likely be felt in Q2 2020.
Colliers believes that the work stoppage due to the ECQ and supply chain
disruption of construction materials are likely to affect office completions in
2020. From our initial forecast of about 1 million sq metres (10.8 million sq
feet), we now project new supply to reach 784,700 sq metres (8.4 million sq
feet). With completion being pushed back by about three to six months,
Colliers now estimates annual new completion from 2020 to 2022 to reach
896,100 sq metres (9.6 million sq feet) from our original forecast of about
977,800
.
sq metres (10.5 million sq feet).
2
Adopt new technology and consider flex-and-core strategy
The government’s directive to implement alternative work schemes such as
work-from-home should encourage occupiers to accelerate the adoption of
modern technology. In our opinion, firms should effectively communicate
cloud computing strategies to their employees to minimize disruption from
the abrupt switch to remote working. Tenants should also consider
implementing a flex-and-core strategy or a mix of traditional and flexible
workspaces. Colliers believes that remote work provides an opportunity for
tenants to re-examine office space demand.
Push for relaxation of government policies
With the slower demand, stakeholders should push for policy concession from
national and local governments. Stakeholders should now push for the lifting
of moratorium on economic zone approval in Metro Manila to entice more
outsourcing locators; urge Congress to delay passage of proposed bills that
intend to reduce incentives granted to ecozone locators; and heed
recommendations pushed for by industry groups such as the Information
Technology and Business Process Association of the Philippines (IBPAP)
including the adoption of split operations for BPOs. In our opinion, POGO
stakeholders should also encourage certain city governments to allow the
entry of new POGO firms into their respective localities.
Q1 2020 new supply and % of total new supply
29K | 31%
Quezon City
19K | 20% • SM North EDSA Tower 2
• Avi re Tower
• Motortra de Corporate Center
• As ter Business Center Ortigas Fringe
14K | 15%
Makati Fringe
• 100 Wes t BPO Building
Bay Area
31K | 34%
• Four E-com Center Tower 1
Source: Colliers International
COL L IERS QUARTERL Y OFFICE | MAN IL A | RESEARCH | Q1 2 0 2 0 | 3 0 APRIL 2 0 20
VACANCY TO RISE IN 2020, UP FOR
RECOVERY IN 2021
Colliers saw vacancy declining to 4.1% in Q1 2020 from 4.3% recorded in Q4
2019. This is partly due to a lower supply recorded in Q1 2020, about 93,200
sq metres (1 million sq feet) against a net take-up of 116,100 sq metres (1.2
millon sq feet). In our opinion, we are likely to see the full effect of the ECQ
and the pandemic for the remainder of 2020. The pace of construction after
the ECQ will also likely depend on how developers observe social distancing in
construction sites.
In Q1 2020, office space transactions, which cover pre-leased spaces, reached
241,000 sq metres (2.6 million sq feet), down 24% from 316,200 sq metres
(3.4 million sq feet) recorded in Q1 2019. A mix of traditional, flexible
workspace operators and outsourcing tenants took up space during the
period, including Sykes, Grab Philippines, Bank of Singapore and Accenture.
Transactions from outsourcing companies were quite stable QOQ at 90,300 sq
metres (971,600 sq feet) from 99,100 sq metres (1.1 million sq feet) in Q4
2019.
Outsourcing deals pre-COVID were encouraging, with demand from this sector
picking up starting Q3 2019. However, given the ECQ and the global pandemic,
Colliers sees tenants delaying decisions on fresh leasing by between one and
two quarters.
For the remainder of 2020, Colliers expects fewer deals from traditional and
non-BPO tenants as they are likely to adopt a wait-and-see stance. In 2019,
Colliers noted that this segment has been growing on the back of a sustained
macroeconomic growth (average annual growth of 6.3% from 2010 to 2019).
But with credit rating firms and multilateral agencies forecasting a slower 2020
Philippine GDP growth (between −0.6% and 4% from the initial 6% to 7%),
Colliers projects slower expansion from these companies in 2020. Most firms
are also adopting cash preservation measures due to economic uncertainty.
In our opinion, if the virus peaks in H1 2020 and market conditions start to
improve in H2 2020, we are likely to see a recovery from both outsourcing and
traditional segments in 2021. The rebound in demand should also offset a
sluggish take-up from POGOs in 2020.
Among the business districts likely to record recovery in 2021 are Quezon City,
Fort Bonifacio and Ortigas Center. A mix of outsourcing and traditional
occupants have pre-leased office space in these business districts.
Once the deployment of POGO employees normalizes and travel bans are
lifted, Colliers sees greater office space absorption in Alabang and Quezon
City. Colliers sees muted leasing in the Bay Area in the next 12 months due to
a pause in POGO transactions.
GEARING UP FOR A REBOUND
From the bitter experience of the Asian Financial Crisis (AFC) in the late 1990s,
Philippine developers have learned the necessity to turn off the supply tap –
and quickly. This was demonstrated after the Global Financial Crisis (GFC) in
2010, where supply dropped to about 203,000 sq metres (2.2 million sq feet)
from 478,000 sq metres (5.1 million sq feet) in 2008 and 541,800 sq metres
(5.8 million sq feet) in 2009.
If take-up in 2020 only achieves 50% of our original forecast of about 900,000
sq metres (13 million sq feet), we expect vacancy will rise to 6% in 2020, up
from the 4.3% in 2019.
Meanwhile, with our projected rebound in market conditions in 2021,
followed by a pick up in office completion and a 33% increase in net take-up,
Colliers sees vacancy declining to 5.0% in 2021. Even with a less diversified
office market in 2010, the Metro Manila office sector turned around quickly
post-GFC, posting a 5.6% vacancy in 2010 from 8.6% in 2009, the highest
recorded since the global economic meltdown.
RENTS TO DROP BEFORE PICKING
UP PACE IN 2021
Colliers has been recording a two-tiered rental structure since the entry of
POGOs in Q4 2016. Traditional and outsourcing occupants are paying a
discount (25%) compared to POGO tenants. As landlords are unlikely to attract
POGO tenants due to the travel ban, we expect rents in selected business
districts to adjust downward. Factoring in softer demand from all sectors, in
2020 Colliers sees a 17% YOY contraction in office lease rates across Metro
Manila, faster than the 14% contraction we recorded in 2009 during the
Global Financial Crisis. With our projected recovery in 2021, lease rates should
rise at about 2%. Colliers sees a faster recovery in 2022.
Primary Authors: For further information, please contact:
Joey Roi Bondoc David A. Young
Senior Manager | Research | Philippines Chief Operating Officer | Philippines
+63 2 8858 9057 +63 2 8858 9009
Joey.Bondoc@colliers.com David.A.Young@colliers.com

Dom Fredrick Andaya Richard Raymundo

Director | Office Services | Philippines Managing Director | Philippines
+63 917 831 6725 +63 2 8858 9028
Dom.Andaya@colliers.com Richard.Raymundo@colliers.com

Contributors:
Donica Cuenca
Research Analyst | Research | Philippines
+63 2 8858 9068
Donica.Cuenca@colliers.com

Martin Aguila
Research Analyst | Research | Philippines
+63 2 8863 4116
Martin.Aguila@colliers.com

About Colliers International

Colliers International (NASDAQ, TSX: CIGI) is a leading real estate professional services and investment management company. With operations in 68 countries, our more than
15,000 enterprising professionals work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For
more than 25 years, our experienced leadership, owning approximately 40% of our equity, has delivered compound annual investment returns of almost 20% for shareholders. In
2019, corporate revenues were more than $3.0 billion ($3.5 billion includingaffiliates), with $33 billion of assets under management in our investment management segment. Learn
more about how we accelerate success at corporate.colliers.com, Twitter or LinkedIn

Copyright © 2020 Colliers International

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it.
No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
COL L IERS QUARTERL Y RESIDEN TIAL | MAN IL A | RESEARCH | Q1 2 0 2 0 | 3 0 APRIL 2 0 2 0

Joey Roi Bondoc

OPPORTUNITIES FOR DEVELOPERS AND BUYERS
Senior Manager | Research | Philippines Softer residential demand in 2020 but economic and office leasing expansion to aid recovery in 2021
+63 2 8858 9057
Joey.Bondoc@colliers.com

2020–22
Insights & Q1 2020 Full Year 2020 Annual Average

Recommendations > Colliers sees a softening of demand particularly

Colliers expects residential
demand in Metro Manila to
soften in 2020 due to the impact
of the COVID-19 pandemic. If the
virus is contained in H1 2020, we
see market sentiment improving
from Q3 2020 and a recovery in
both demand and supply in 2021.
in business districts dependent on POGOs 2 . We
see a rebound in 2021 especially if the virus is
Demand contained and market sentiment improves 1,100 units 4,500 units 7,200 units
before the end of 2020.
> We project a slower completion in 2020 due to
work stoppage following the implementation of
ECQ3 in Luzon. Colliers sees the delivery of new
Supply units rebounding in 2021 as new supply is likely 1,670 units 10,940 units 8,550 units
to move in step with the pickup in demand.

To take advantage of the Annual Average

QOQ / YOY / Growth 2019–22 /
recovery, Colliers encourages
End Q1 End 2020 End 2022
developers to highlight high- > Colliers sees rent for prime 3BR units in major
quality property management business districts declining due to softer 2.0% -5.5% 1.9%
with a focus on sanitation and demand in the secondary market, and QOQ
emergency preparedness, rental growth was 0.8 pps lower. We see rents
Rent PHP786 PHP729 PHP757
implement creative lease terms recovering in 2022 as the market improves.
for Ready-for-Occupancy (RFO) > We project vacancy in the secondary market
units, and offer flexible payment +0.3pp +3.7pp -1.6 pp
to rise due to softer take-up following the
terms to attract buyers, especially COVID-19 outbreak. Vacancy will likely ease
as pent-up demand starts to be in 2021 as we expect a rebound in secondary
Vacancy 11.3% 15% 11.7%
released in 2021. residential demand.
Meanwhile, we encourage buyers > Colliers sees residential prices declining in
2020. We see prices rising at a slower pace 5.9% -15.1% 1.7%
to take advantage of more
attractive pricing in the market, than rents in 2021, following a recovery of
Capital demand from local and foreign employees,
especially for mid-income 1 Values PHP246,000 PHP197,000 PHP203,700
including POGO workers.
condominium units.
Source: Colliers International. Note: USD1 to PHP51 as of the end of Q1 2020. Demand represents net take-up (in units). Rent and capital values are per sq metre. 1Mid-
income projects are priced between PHP3.2 million to PHP6.0 million. 2POGO = Philippine Offshore Gaming Operators. 3 ECQ = Enhance Community Quarantine.
COL L IERS QUARTERL Y RESIDEN TIAL | MAN IL A | RESEARCH | Q1 2 0 2 0 | 3 0 APRIL 2 0 2 0
RECOMMENDATIONS
Developers should highlight property management measures
Property management is crucial to the safety and health of residential
towers as well as unit owners. Therefore, we recommend that developers
strengthen and highlight their property management capabilities. These
should include effective disaster preparedness plans and sanitation
measures to avoid viral infection and transmission.
Offer flexible payment packages and terms to attract buyers
Colliers encourages developers to offer more flexible payment packages
and terms to potential buyers. With a slowdown in economic activities and
stoppage of work, we believe that now is an opportune time for developers
to be more proactive and to touch base with buyers. In our opinion,
proactive developers are likely to stand out when the pandemic wanes,
similar to those who stood out after the Asian and Global Financial Crises.
Developers should explore creative leasing models
We encourage developers with substantial supply of Ready-for-Occupancy
(RFO) units to explore more creative leasing schemes. In our opinion,
developers should explore leasing out condominiums as shared units to
outsourcing employees, as living in dorms near their workplaces has now
become an integral part of business continuity plans for these firms.
Investors to take advantage of better pricing
In our opinion, now is the time for condominium buyers to take advantage
of better pricing in the market due to softer demand. The Bangko Sentral ng
Pilipinas (BSP), the central bank, further lowered the interest rate by 50
basis points (bps) in March, in addition to the 25bps cut in February 2020 1 .
This should result in lower mortgage rates, and in turn, further entice
opportunistic investors to purchase lower-priced condominiums in the
market. Colliers believes that if the pandemic persists beyond H1 2020,
pricing in the secondary condominium market could soften to the level
offered in the pre-selling period. In our opinion, buyers should watch for
price cuts in the mid-income segment, those priced from PHP3.2 million
(USD62,800) to PHP5.9 million (USD115,700) per unit.
1 Bangko Sentral ng Pilipinas.
http://www.bsp.gov.ph/mon et ary /mon etary.asp, March 30, 2020
2
SLOWER COMPLETION IN 2020,
REBOUND LIKELY IN 2021
Around 1,670 new units were delivered in Q1 2020, the lowest number of
completions recorded in the past six quarters. The new condominium units are
located in Fort Bonifacio and the Bay Area.
For 2020, Colliers expects a slowdown in completion due to work stoppage
following the enhanced community quarantine (ECQ) implementation in Luzon.
We now expect the delivery of about 10,900 units, a 26% drop from the 14,700
units initially estimated for 2020. The work stoppage has pushed back the
completion of a couple of residential towers due to be completed in Q4 2020
to Q2 2021. The downward adjustment in new supply should temper the
increase in vacancy in the Bay Area, where the demand for residential units has
primarily been driven by the Philippine Offshore Gaming Operators (POGO)
sector since their entry in Q4 2016.
The work stoppage in March and April is likely to
have a ripple effect on Metro Manila’s residential
supply up to 2022. While we see completion
picking up in 2021 with 7,900 units, we see the
capital region’s stock by the end of 2022 reaching
only about 155,730 units, down from our initial 7,900 units
forecast of 158,290 units. This comes with the completion in 2021
delay of a few selected projects located in the Bay (previ ous forecast
Area, Alabang, and Makati CBD. Projects initially wa s 7,190 units)
scheduled for H2 2022 were delayed to 2023.
Metro Manila completed condominium projects, Q1 2020 (units)
Bay Area (9.0%)
Six Senses Resort I-Sight
Tower – 152u
Fort Bonifacio (91%)
Avida Towers Turf 1 – 540u
The Venice Luxury Residences –
St. Mark – 235u
Times Square West – 738u
Source: Colliers International. Percent represents proportion to total Q1 2020 completions.
COL L IERS QUARTERL Y RESIDEN TIAL | MAN IL A | RESEARCH | Q1 2 0 2 0 | 3 0 APRIL 2 0 2 0
VACANCY TO RISE
Vacancy in Metro Manila’s secondary market, which includes ready-for-
occupancy (RFO) units in key business districts, slightly increased to 11.3%
in Q1 2020, up from 11.0% in Q4 2019. In our opinion, the full impact of
the pandemic on vacancy is likely to be seen in Q2 2020.
Colliers expects vacancy to rise to 15% in 2020 from 11% in 2019. The
higher vacancy factors in the lower demand caused by the COVID-19
health crisis coinciding with the delivery of almost 11,000 units in 2020.
We initially estimated vacancy to be at 19% considering our initial supply
projection of 14,700 units in 2020 and slower take-up from the POGO
sector.
Colliers believes that while overall demand for condominiums in Metro
Manila is likely to decline in 2020, business districts, such as the Bay Area,
are at risk of greater impact. In business districts, much of the take-up has
primarily been driven by POGOs over the past three years. In areas
outside of the Bay Area, demand is also likely to be tempered by concerns
about rising unemployment as well as a fall in overseas worker
remittances projected by the National Economic and Development
Authority (NEDA). Economic analysts are projecting remittances to drop
by USD3.0 billion (PHP153 billion) to USD6.0 billion (PHP306 billion) in
2020 1 , about 10% to 20% lower compared to remittances received in
2019. Anecdotally, these remittances partly fuel demand for
condominium units classified as affordable (PHP1.7 million to PHP3.2
million or USD33,300 to USD62,800) and mid-income (PHP3.2 million to
PHP5.9 million or USD62,800 to USD115,700) segments.
Assuming the pandemic is contained in H1 2020, the Philippine
government’s economic managers and credit rating agencies are
projecting an economic recovery by 2021. Colliers believes that a rebound
of Metro Manila’s office sector in 2021 is likely to have a spillover impact
on residential demand. Therefore, Colliers expects an increase in demand
in key business districts where outsourcing and traditional 2 occupiers are
concentrated. Among the business districts likely to benefit from a pick-up
in residential demand are Fort Bonifacio, Alabang, Ortigas Center, and
Rockwell Center.
1BusinessMirror, Virus, oil price plunge to cut 400-k OFW jobs, 2020. 2Consists of companies in various
sectors including legal, engineering and construction, government agencies and flexible workspace
3 operators. 3Asian Financial Crisis. 4Global Financial Crisis.
RENT GROWTH TO RECOVER
The Philippine economy and property market are facing a tremendous
challenge. The scale of this pandemic is unprecedented in recent history. This
is likely to result in softer demand for condominium units in Metro Manila.
Colliers sees rents in the secondary residential market falling by 5.5% in 2020.
This is slower than the 15% contraction during the Asian Financial Crisis in
1998 but steeper than the 3.7% fall in 2009 during the Global Financial Crisis.
Historically, about a year after the Asian and Global Financial crises, rents
rebounded. With economic growth and office leasing likely to pick up pace in
2021, this should support demand for condominium units all over Metro
Manila, and we expect lease rates to grow at a moderate rate of about 1.9%
annually from 2021 to 2022. Colliers also sees rent growth picking up in areas
where POGOs have pre-leased office space, such as Quezon City, Alabang, and
Bay Area especially once the travel bans are lifted and expansion from these
firms sustains pace in 2021.
Rents ~1.9% annually
rebound from 2021 to 2022
PRICES TO DIP IN 2020
But economic expansion to lift values in 2021
Assuming the worst-case scenario of an economic contraction (-0.6%)
projected by NEDA and the absence of demand from the POGO sector which
played a major role in raising condominium prices sine 2017, Colliers sees
residential prices dropping by about 15% in 2020 with a slow recovery in
2021 assuming the pandemic is contained starting Q3 2020.
The pent-up demand should lead to higher take-up in 2021 once market
conditions improve. Previous crises have shown that prices recover
immediately once market sentiment and business activities start to improve.
During the AFC 3 , prices dropped between 9% and 14% from 1998 to 1999,
followed by a recovery in 2000 when prices grew by 24%. The same trend
was observed during the GFC 4 when prices dropped by 1.5% in 2009 and
immediately recovered in 2010 with a 2.1% increase in average prices.
Primary Author: For further information, please contact:
Joey Roi Bondoc David A. Young
Senior Manager | Research | Philippines Chief Operating Officer | Philippines
+63 2 8858 9057 +63 2 8858 9009
Joey.Bondoc@colliers.com David.A.Young@colliers.com

Contributors: Richard Raymundo

Managing Director | Philippines
Donica Cuenca +63 2 8858 9028
Research Analyst | Research | Philippines Richard.Raymundo@colliers.com
+63 2 8858 9068
Donica.Cuenca@colliers.com

Martin Aguila
Research Analyst | Research | Philippines
+63 2 8863 4116
Martin.Aguila@colliers.com

About Colliers International

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