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Operations and Market Review
Overseas - The Philippines

The Podium continues to be the preferred retail destination in Ortigas.

Keppel Land, through 51%-owned Keppel Philippines Properties, has two development projects in Metro Manila - Palmdale Heights and SM-KL Towers.

RESIDENTIAL
Pasig City
Palmdale Heights
Palmdale Heights is a middle-income residential development located on a 7.6-ha site in Pasig City, with easy access to the central business district (CBD) in Makati and Ortigas.

The phased development will comprise 29 residential blocks with a total of over 4,000 condominium units when completed. With elegantly designed living spaces, quality fittings and finishes, as well as carefully planned amenities, it offers homeowners a self-contained environment amidst tranquil surroundings.

The first two phases with a total of 828 units have been completed and 86% or 715 units have been sold as at end-February 2010.

The third and fourth phases will house eight residential blocks with 1,264 units, delivered with quality enhancements, blending comfort and affordability. It will be launched when market conditions improve.

COMMERCIAL
Mandaluyong City
SM-KL Towers
SM-KL Towers is a mixed-use development strategically located on a 2-ha site in the Ortigas CBD.

Phase 1 of the retail component, The Podium, is a popular shopping destination. With over 18,000 sm of leasable space, it features a good mix of 150 specialty stores of well-known international and local labels, and offers a wide choice of quality merchandise.

The Podium also has a wide selection of fine restaurants and service outlets. Together with first-class amenities, the lifestyle mall provides visitors with enhanced shopping and dining experiences.

The Podium continues to be the preferred venue for holding events and festive celebrations. With two state-of-the-art cinemas, it has also become an exciting hub of entertainment and leisure.

The six-storey Benguet Centre is being demolished in preparation for Phase 2 of the commercial component, which will entail an expansion of the basement carpark and the retail mall.

Plans for an office tower and a residential block to be constructed above the retail mall are currently under review.

ECONOMIC REVIEW
Robust Growth
The Philippine economy achieved GDP growth of 7.3% in 2010, the strongest since 1976. Economic expansion is fuelled by the industry and services sectors, and steady remittances from Overseas Filipino Workers. Filipinos working overseas remitted home US$18.8 billion in 2010, 8.2% higher than 2009 levels.

The Philippine government is expecting another year of robust growth with a target GDP growth of 7-7.4% for 2011.

Inflation remained manageable, averaging 3.8% in 2010 compared to 3.2% in 2009. The government, which targets inflation of 3-5% for 2011, will closely monitor the inflation trend.

The central bank has maintained interest rates at the current low levels of 4% for overnight borrowing and 6% for overnight lending since July 2009 to support credit growth.

MARKET REVIEW
Residential
Steady Demand
In 2010, a total of 1,100 and 760 residential units were completed in Makati and Ortigas respectively. This brought the supply of condominiums in Makati and Ortigas CBDs to 13,100 units and 7,500 units respectively as at end-2010.

Occupancy rate in Makati dipped slightly to 91.2%. There was a decline in demand for studio and 1-bedroom units that target young professionals and start-up families while demand for expatriate quality 2-bedroom and 3-bedroom units remained strong.

Rents of luxury units in Makati and Ortigas were largely unchanged from the previous year at an average of P550 psm per month (psm/mth) and P340 psm/mth respectively.

Capital values in Makati rose 2.5% year-on-year to P102,000 psm, while capital values in Ortigas increased by 2% to P58,000 psm.

Office
BPO Sector to Boost Demand
The supply of office space in Makati and Ortigas CBDs remained relatively stable at 2.7 million sm and 1.1 million sm respectively as at the end of 2010.

There is no new office development in the pipeline in Makati except for a prime building with 65,000 sm of office space due to be completed in 2012. In Ortigas, about 28,000 sm of office space will be completed over the next three years.

Makati's overall office occupancy rate increased to 94.5% as at end-2010. However, occupancy rates of premium and Grade A buildings declined due to alternative office locations in Rockwell and Fort Bonifacio. Ortigas also recorded higher occupancy rate of 96.8% in 2010.

Rental rates of premium-grade office buildings in Makati declined by 2.3% from the beginning of 2010 to P800 psm/mth. With growing demand from the business process outsourcing industry and limited new supply, rents in Makati CBD are expected to increase by 10-15% in 2011.

Meanwhile, Grade A rents in Ortigas rose to P550 psm/mth in 2010. Capital values in Makati and Ortigas rose about 2% to P101,000 psm and P55,000 psm respectively in 2010, and are expected to increase marginally in 2011.

Retail
Prospects for Rental Growth
Supply of retail space in Metro Manila increased slightly to 5.1 million sm. Current trend saw mall developers expand through development of small-scale community malls as well as retrofitting and expansion of existing malls.

Average occupancy rate remained stable at 91.7%, a slight improvement from 90.8% at the beginning of the year.

Effective rental rates in Makati remained at P1,120 psm/mth while rates in Ortigas stood P1,035 psm/mth. As consumer sentiments continue to improve, strong retail sales are expected, which will likely push up occupancy and effective rental rates by between 3% and 5% in the first half of 2011.


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