Real Estate Industry Analysis in Metro Manila

Colegio de San Juan de Letran
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
B. Industry and Competitor Analysis
B.1 Industry Analysis
1. Market size and/or growth rate and state in the growth cycle.
Real estate was among the main drivers of GDP growth for 2017. The real estate
industry contributed a total of 3.2% to the country’s 2017 GDP.
PSA also reported that in 2017, the Real Estate Industry recorded a total of PhP501.5
billion gross value added at current prices which is 12% higher than that of 2016 i.e.
PhP444.3 billion.
Here are the different segments of a real estate company.
a) Residential
Recent data shows that 1,970 units were completed in the third quarter, the year
2017. Most of which are located in the Manila Bay area and Makati City.
Location AS OF 2017 2018 2019

ALABANG 3800 400 -
Araneta Center 4200 - -
Eastwood City 7500 1000 600
Fort Bonifacio 24300 4200 3000
Makati CBD 22100 3600 600
Manila Bay Area 8900 5500 2600
Ortigas Center 16200 1500 600
Rockwell Center 4200 - 800
Total 91200 16200 8200
Metro Manila Residential Condominium Launches and Take Up
Colliers International Philippines said the strong take-up in 2017 comprised mostly
of affordable to mid-income units with prices ranging from P1.7 million to P5.9
million.
The overall vacancy rate in Metro Manila stands at 12.7% which is expected to
further increase by the end of 2017 which in turn could result to reach mid-teen levels
of vacancy by 2018 before normalizing at lower rates by 2019.
b) Office Spaces
BUILDING LOCATION GLA, sqm

Robinsons Cyber Sigma Fort 48,200
Bonifacio
Vertis BPO Phase 1 Quezon City 39,200
Menarco Tower Fort 25,400
Bonifacio
The Curve Fort 24,200
Bonifacio
Rockwell Sheridan Mandaluyong 22,000
Tower 1
South Park Corporate Alabang 12,900
Tower
Inoza Tower Fort 12,400
Bonifacio
81 Newport Square Pasay 10,300
Total 194,600
Data shows above that for the 3rd quarter of the year 2017, 8 buildings were
completed, representing 194,600 sq. m of office spaces. The majority of which comes
from Makati and Fort Bonifacio.
c) Hotel and leisure
Metro Manila New Hotel Room Stock

Metro Manila New Hotel Room Stock
In the data above, it is seen that at least 1,700 additional rooms to be completed by
the end of 2017. Most of the new rooms from 2019 to 2020 will be in Fort Bonifacio,
Manila Bay Area, and major townships across Metro Manila. Demand for hotel rooms in
Metro Manila is still being driven by the Philippines’ traditional visitor generating
markets such as South Korea, United States, China, and Japan.
Metro Manila Visitors’ Arrival Percentage

Demand for hotel rooms in Metro Manila is still being driven by the Philippines’
traditional visitor generating markets such as South Korea, United States, China, and
Japan, which account for about 60% of the country’s total foreign arrivals. Real
property experts forecast a10%growth this year to 6.6 million, slower than the Tourism
department’s 17% or 7 million tourists. A total of 2.88 million international tourists
visited the Philippines in the first five months of 2017. Occupancy rates will be
between 60%-65% from 2019 to 2020 due to projected new completions.
With the Metro Manila office market's good start in 2018, developers are poised to
further expand their office portfolios. The country's top four developers - Ayala Land,
Megaworld, SM Prime Holdings, Robinsons Land - spent a total of Php 273.0 billion
on capital expenditures last 2018. We estimate that close to a tenth of this amount has
been disbursed for office development alone.
2. Market Share Analysis
Market Share
Megaworld Corporation Ayala Land Inc. SM Primes Holding Inc.

According to Forbes, Megaworld ranked #1236 in terms of its market value
having $11 Billion. Compared to its competitors Ayala which ranked #1092 that has
$21.6 Billion, they are the only real estate business in the Philippines that got to enter
the top 2000 world’s largest public company. The market shares of each industry
player were assumed based on the market value % in Forbes and while for the other
competitor we used the market capitalization.
As shown in the figure above, Megaworld Corporation ranked first with a market
share of 9 %. Followed by Ayala Land Inc. which has 9%. Next is SM Prime Holdings
Inc. of 7%.
The revenues of the property industry grew at a compounded annual growth rate of
17 percent from 2013 to 2017. The major players to have captured the lion’s share were:
Ayala Land, Inc. (ALI), SM Prime Holdings, Inc. (SMPH) and Megaworld Corp.
(MEG). The prices are increasing, the demand is high, and the market is growing at a
sustainable pace, the property sector is expected to continue its robust performance in
the next four years. Philippines’ real estate market looks bright for 2019, especially if we
look at places like Metro Manilla.

With a growing population, and stable consumer and labor demand, a positive
outlook for the real-estate landscape is seen in the Metropolitan regions in the country.
Infrastructure projects and government initiatives are key factors necessary to sustain
these growth expansions. In around five-year time, these expansions are expected to
produce significant positive performances. The Company’s real estate operations are
subject to intense competition, and some competitors may have substantially greater
financial and other resources than the Company, which may allow them to undertake
more aggressive marketing and to react more quickly and effectively to changes in the
markets and in consumer preferences. In addition, the entry of new competitors into the
real estate industry could reduce the Company’s sales and profit margins. In the real
estate development industry, the Company competes against a number of residential and
commercial developers and real estate services companies, including Ayala Land, Inc.
(“ALI”) for the Company’s projects in the Fort Bonifacio area of Metro Manila, and
Robinsons Land Corporation, SM Prime Holdings, Inc. and ALI for the Company’s
retail and office leasing activities. Megaworld competes for the acquisition of prime
land, resources for development and prospective purchasers and tenants. For example,
the city governments of Quezon City, Pasay City, and Manila are offering land for the
development of business districts, particularly to the developers targeting the BPO
industry and that may have projects which compete with the Company’s current
development projects. Increased competition from other real estate developers and real
estate services companies may adversely affect the Company’s ability to acquire and sell
properties or attract and retain tenants.

3. Market Mix
The marketing mix is a combination of factors that are controlled by the company to
promote its brand of product in the market. The 4P’s of marketing are Price, Product,
Promotion, and Place. However, the marketing mix is increasing due to the market is
very unpredictable and by adding some factors you can create a strategy that can help
greatly in the organization.
Product
The main categories of a real estate are:
 Land- is usually combined with other properties in order to increase its value.
 Residential- are those consist of housing for individuals, families, or groups of
people.
 Commercial- refers to land and buildings that are used by businesses to carry out
their operations.
 Industrial- refers to land and buildings that are used by industrial businesses for
activities such as factories, mechanical productions, research and development,
construction, transportation, logistics, and warehousing.

Price
The average price of a luxury 3-bedroom condominium unit in Makati central
business district (CBD) soared 15.55% (9.91% inflation-adjusted) during 2018 to
PHP230,000 (US$4,371) per square metre (sq. m.), from y-o-y rises of 10.46% in 2017,
9.95% in 2016, 13.43% in 2015, 7.11% in 2014, 14.37% in 2013, and 10.06% in 2012,
according to Colliers International. During the latest quarter, condominium prices in
Makati CBD increased 5.02% (5.55% inflation-adjusted) in Q4 2018.
By property type:
 Condominium units saw y-o-y price increase of 5.8% (-0.8% inflation-
adjusted) in Q3 2018 from a year earlier
 For single detached/attached house, prices rose by a meager 0.2% (-6.1%
inflation-adjusted) during the year to Q3 2018
 Duplex house prices surged 30.7% (22.5% inflation-adjusted) y-o-y in Q3
2018
 Townhouse prices rose by 18.3% (10.9% inflation-adjusted) over the same
period
Place
An investor can always choose where the next project will be built. This strategy
will help assess what place is the most suited for the project. The location is the most
important factor that a real estate business must consider because this where your
project generates income and help the company to grow in the future. Also, in finding
the location of the project it must be abiding by the law and does not cross the rules
and the regulation given by the government.
“The Company is one of the leading property developers in the Philippines and is
primarily engaged in the development of large-scale, mixed-use, master-planned
townships that integrate residential, commercial, and office developments. Townships
typically also have educational, medical, and other civic facilities that support the
respective market of each development. Founded in 1989, the Company initially
established a reputation for building high-quality residential condominiums and
commercial properties in certified first choice locations in Metro Manila. Beginning in
1996, in response to demand for a lifestyle of convenience, the Company began to
focus on the development townships beginning with Eastwood City.”
NCR | Geohazard Map Philippines

This is the Geohazard Map for NCR, the brown shaded area is prone to high
susceptibility landslide, and the green one is where the landslide is moderate and the
yellow one has a low susceptibility of landslide, as you can see almost all of them are
near in a mountain area. The violet one is high susceptibility on flooding, all of the
violet shaded area is very near to the waters and the gray shaded area has a low chance
of flooding. The red one is the most dangerous place to build a property or a project
because it passes through the West Valley Fault Line where the earthquake always
occurs.
Promotion
 Online Advertising
Online Advertising is the best way to promote your company, 7.9 million
populations in the Philippines is using internet or the World Wide Web. With effective
real estate ads, Megaworld Corporation can reach new contacts and earn more
investors. The Ad must capture the audience attention by any means and convince the
audience why they should invest in their company. They must show to their audience
that they give the best service possible for their clients and investors. They can use
different social media platform for online advertising like Facebook, Twitter,
YouTube, Instagram etc. It can come in any form like text, videos or image as long as
the purpose is to convince people to have an interest in the company.
 Price Deal
At the ground level, selling and buying of real estate involves asking prices, offer
prices and sales prices. The sales price of real estate is a function of its asking and
offer prices. It can attract buyers by negotiating the prices like asking the buyer for
their highest and best offers. Real estate negotiations involve a great deal more than
just the asking price and the offer price. You can negotiate other aspects of the deal
as well to entice the other side to come up or down on their price. You can offer a
better settlement date or to pay closing costs. The bottom line is to keep talking,
because if either party refuses to respond, the deal is typically dead from a
contractual standpoint. Counteroffers are only legally binding when the buyer
accepts their terms.
 Contests/Sweepstakes/Games
In the real estate business, hyping up exposure for your brand is the most
advantageous promotion. There are a variety of approaches to contest-based
marketing. No matter what format you choose, there are steps you can take to set up
your campaign for success. For the people, it’s hard to turn down when something is
free. For starting the giveaway you can upload photo of the prize on the Facebook
page. Include details in your post like when the contest ends and how to enter. Feel
free to use applicable hashtags to spread your post as far across social media as
possible.A popular approach to the straight-up giveaway method is to treat it like a
raffle. This strategy is very effective because No matter how you decide to format it,
holding a contest on social media will increase engagements with your followers and
promote your brand exposure.
4. Buyer/Consumer Profile
The customers of a real estate industry could be labeled as an individual who
makes a buying decision of residential condominiums or commercial properties. Other
than that, some also avail services such as project design, construction oversight, and
property management. Not all people have the same purchasing power because of
different factors that affect their lifestyles such as their wages, employment, and social
class.
Income Groups
There are three income groups that are known as the High, Middle and Low
Income Groups.
The high-income group is those people who earn an average of P200,000 a month
or P2.4 million a year, as per the National Statistical Coordination Board and is
described as the rich. They are only a few numbering only 0.1% of total families in the
Philippines. The middle-income class is known to earn an average of P36,934 per
month while the low-income segment earns an average of P9,061 per month. The total
family income and expenditures per income class could be derived as follows:
Employed People
In the Philippines, the number of employed persons increased to 42,953 in the
third quarter of 2019 from 42,242 in the second quarter of 2019. Those employed
persons are people with the minimum required age who work during a certain time for
a business.
5. Factors Affecting the Cost of Doing Business

 Demographics
Demographics are the data that describes the composition of a population, such as
age, race, gender, income, migration patterns and population growth. These statistics
are an often overlooked but significant factor that affects how real estate is priced and
what types of properties are in demand. These statistics are an often overlooked but
significant factor that affects how real estate is priced and what types of properties are
in demand. Major shifts in the demographics of a nation can have a large impact on
real estate trends.
 Interest Rate
Interest rates also have a major impact on the real estate markets. Interest
rates also have a major impact on the real estate markets. It's important to note that as
interest rates rise, the cost to obtain a mortgage increases, thus lowering demand and
prices of real estate.
 Economy
Another key factor that affects the value of real estate is the overall health of the
economy. This is generally measured by economic indicators such as the GDP. Real
estate also affects many other areas of economic well-being that aren't measured. For
example, a decline in real estate sales eventually leads to a decline in real estate prices.
That lowers the value of all homes, whether owners are actively selling or not. It
reduces the number of home equity loans available to owners. They will cut back
on consumer spending.
“On the other hand, the following sub-industries posted slower growth: Real
Estate, Renting and Business Activities, 4.7 percent” [ CITATION Phi19 \l 1033 ]

This statistic made by Philippine Statistic Authority shows that real estate business
have a slower growth compare to other industries.
Source:
Housing Equity Withdrawal at Bank of England.
The illustration above how the economy affects the real estate business in UK, in
the year 1990 and 2007 the house price drop because of recession of economy and in
the year 1997 and 2008 the price rate rise because of wealth effect, because of the rise
in economy the wealth of people increase and so the price of the house.
 Government Policies/Subsidies
Legislation is also another factor that can have a sizable impact on property
demand and prices. Tax credits, deductions and subsidies are some of the ways the
government can temporarily boost demand for real estate for as long as they are in
place. Being aware of current government incentives can help you determine changes
in supply and demand and identify potentially false trends.

The prime example for Government Policies is the REPUBLIC ACT NO. 9646 the
Real Estate Service Act of the Philippines. According to this law:
“AN ACT REGULATING THE PRACTICE OF REAL ESTATE SERVICE IN THE
PHILIPPINES, CREATING FOR THE PURPOSE A
PROFESSIONAL REGULATORY BOARD OF REAL ESTATE
SERVICE, APPROPRIATING FUNDS THEREFOR AND FOR OTHER
PURPOSES.”
“SEC. 2. Declaration of Policy. – The State recognizes the vital role of real estate
service practitioners in the social political, economic development and progress of the
country by promoting the real estate market, stimulating economic activity and
enhancing government income from real property-based transactions. Hence, it shall
develop and nurture through proper and effective regulation and supervision a corps
of technically competent, responsible and respected professional real estate service
practitioners whose standards of practice and service shall be globally competitive
and will promote the growth of the real estate industry.”
“SEC. 39. Penal Provisions, – Any violation of this Act, including violations of
implementing rules and regulations, shall be meted the penalty of a fine of not less
than One hundred thousand pesos (P100,000.00) or imprisonment of not less than
two (2) years, or both such fine and imprisonment upon the discretion of the court. In
case the violation is committed by an unlicensed real estate service practitioner, the
penalty shall be double the aforesaid fine and imprisonment.” [ CITATION Sen09 \l
1033 ]
This law deals primarily with the acts generally considered to be real estate services,
the qualifications of those who may practice the profession, and the penalties
corresponding to violations of its provisions.
6. Operations/ Productions Aspects
Global-Estate Resorts, Inca subsidiary of Megaworld Corporation, is a leading
developer tourism estates in the Philippines. These master planned communities,
featuring world-class lifestyle and leisure offerings are envisioned to set new standards in
the country's tourism industry. GERI promotes a culture centered on teamwork and
productivity and offers an environment that rewards performance and loyalty with career
advancement and professional growth. GERI is the leading developer of master-planned
integrated tourism estates in the Philippines, with a current landbank of 3,100 hectares in
major tourist destinations like Boracay, Tagaytay and Batangas. GERI’s current portfolio
of projects includes BoracayNewcoast, Boracay’s largest master-planned beach
development, Twin Lakes in Laurel, Batangas (near Metro Tagaytay), the country’s first
and only vineyard resort community, Sta. Barbara Heights, a mixed-use township project
in Iloilo and Southwoods City, a large-scale fully integrated township in the boundaries
of Carmona, Cavite and Binan, Laguna.

Empire East Land Holdings, Inc. (EELHI) was a Community Housing Division of
real estate giant Megaworld Corporation. This division was responsible for the
development of affordable mass housing projects (condominium communities or
house and lot packages), sale of residential lots, and sale/lease of commercial and
industrial space. The Megaworld management then made a decision to separate its
core business into high-rise residential and office accommodations and master-planned
townhouse communities on one hand, and lower- and middle- income housing, on the
other hand. Currently, the company is focused on transit-oriented condominium
developments in metro manila that make city-living even more convenient. Empire
East’s completed projects include Laguna Bel Air, California Garden Square, The
Cambridge Village, The Xavier Hills, Greenhills Garden Square, San Francisco
Gardens, Little Baguio Gardens, Gilmore Heights, Governor’s Place, and Kingswood
Makati.
Current projects include San Lorenzo Place, Pioneer Woodlands and Little Baguio
Terraces, The Rochester, The Sonoma, Kasara and The Renaissance.

Suntrust Properties, Inc. is a wholly-owned subsidiary of Megaworld Corporation
catering to the affordable market. In pursuit of its vision to be “the yardstick in the
affordable township development and to be the buyers’ first choice”, Suntrust
promises to build products that are adaptive to the needs of its buyers. Since its
inception on November 14, 1997, SPI has created numerous self-sustaining residential
communities in Dasmariñas, Gen. Trias, and Silang, Cavite. The company also has
condominium development projects located at the very heart of Manila. From the time
of its incorporation it has led the way in providing affordable homes and master-
planned communities to the Filipino market. Combining well-thought-out designs
which focus on space-saving and functionality features, delivering a high standard of

comfort and style customized to the needs of low-to-moderate-income Filipino
families, making it today’s developer of choice.
Fil-Estate Management, Inc. (FEMI) is a privately held investment and
management company organized in 1982. FEMI has equity interests in several
companies in the Philippines engaged in mass transportation and infrastructure, real
estate sales and development, hotel and leisure, information technology, security and
other businesses. FEMI owns 87.885% of Metro Global Holdings, Inc., a PSE listed
company, which has a 28.4% interests in Metro Rail Transit Holdings, Inc. II (MRTH
II). MRTH II wholly owns Metro Rail Transit Corporation, which was awarded by the
Philippine Government the BLT agreement to build, lease and transfer a 16.9
kilometer rail transit system in Metro Manila, known as LRTS Phase I or the Metro
Rail Transit (MRT) 3. FEMI was also responsible for the listing with the PSE of Fil-
Estate Land, Inc., now Global-Estate Resorts, Inc.

Stateland, Inc. is one of the leaders in property development and Philippine real
estate innovation. For three decades, it has mastered the essentials of the real estate
business – from conceptualization to development, towards financing and marketing
of high-quality real estate products and services. The company aims for constant
growth and diversification in varied levels of real estate projects catering to the low,
middle and high-income markets. The company is one of the most active participants
in the shelter program of the government pioneering in areas with potential growth and
conducive to economic development. It will remain as a dominant force in the industry
with its continued expansion covering a wide range of products and services for the
total satisfaction of its valued clients. The company remains committed in supporting
the government in flagship project of providing housing to the Filipino people.
Stateland has also been known as one of the most active participants in the
government’s shelter programs, pioneering in areas with potential growth and
conducive to economic development.

7. Technology Development
Real estate has always been an industry dependent on technological
developments, but the past few years have held some major breakthroughs. Property
investors and real estate agents need to know that they're spending their time well, and
new technology may be able to help them do it.
 Artificial Intelligence
Artificial intelligence is the next generation tool that will take care of ongoing
prospecting, lead generating and old fashion customer service. AI is so
sophisticated that clients can get information instantly and agents can have a personal
assistant working 24/7. This development can make any transaction for the
investors/clients more fast and reliable. This will boost the company appearnce to the
market.
 Virtual Reality
Virtual reality is a simulated experience that can be similar to or completely
different from the real world. This will make the client of Megaworld Corporation
truly experience a property without setting foot into physical space of the actual
property. This will consume less time and it’s faster than traveling to the actual place.
 Personalized
Recommendation
It will helps to know what are the client needs and wants on their properties.
There are many software that can be used in this method (e.g. Recommender System)
this system track and log consumer behavior and then match appropriate products and
services based on this behavior. For a large corportion, this development can help
them build better connection to their client and increase theory credibility as a top
leading real estate business in the Philippines.
8. Industry Financial Analysis
Financial ratios are generally ratios of selected values on an enterprise's financial
statements. There are many standard financial ratios used in order to evaluate a business
or a company. Financial ratios can also be used by managers within a firm, by current
and potential shareholders (owners) of a firm, and by a firm's creditors.

9. Problems In The Industry
It's not always easy to run a real estate business. Many factors, many of which are
outside brokerages' control, affect such businesses. The good news is that real estate
companies that anticipate these problems can take steps to solve them when they arise.
It's all part of good planning, something that is essential for any entrepreneur who
wants to run a successful real estate company.
Here are some issues currently impacting the industry that have the potential long-
term impact over the next three to seven years:
a) Rising rates and the economy
Increasing rates aggravate the affordability crisis and has stakeholders concerned
about a potential recession in 2019-2020, which would impact jobs. Rising rates can
actually be good – and bad – for the economy. They’re bad when they increase costs.
They’re good when they monitor business activity and keep inflation in check.
b) Generational change and demographics
The real estate market is currently influenced by four demographic groups:
millennials, baby boomers, Gen X, and Gen Z. Some companies have already started
to adjust work processes, location, and space utilization in response to demographic
changes; the housing market will also have to respond to evolving demands. Even
though the different groups have overlapping desires, there are important differences
in timing and ability to pay.
c) Infrastructure
Chronic infrastructure underinvestment has elevated risk of short- and long-term
economic drag. Despite some political efforts, there have been very few serious
attempts to address infrastructure maintenance problems. All real estate depends on

well-maintained, reliable infrastructure, such as reliable utilities, efficient roads, and
transit routes.
d) Disruptive Technology
The real estate industry, like the rest of world, is poised to adopt new
technologies. E-commerce has drastically changed the retail sector, while ride-
sharing companies are altering the need for residential garage space. Data continues
to be commoditized, offering increased transaction transparency and enhanced
demographic targeting. As owners and investors move to adopt these new
technologies, the impact on residential areas include an increased demand for
connectivity, smart homes, and can cause older structures to be less desirable.
e) Natural Disasters & Climate Change
Natural disasters and climate change are expected to increasingly affect real estate
over time, which in turn are pushing national and local communities to establish
policies and regulate energy and sustainability in order to combat these
environmental conditions. However, more legal measures at the state and local levels
imply more hurdles for real estate developers, especially with respect to corporate
relocations and expansions.
10. Critical Success Factors
Financial Profit
SM Prime Holdings, Inc has a net profit of PHP 32,200,000,000 while while
Ayala Land Inc. has a PHP 29,200,000,000 and lastly Megaworld Corporation has a
net profit of PHP 15,843,826,517 based on the audited financial statements. Financial
profit is a very important factor for any business. In fact, it is the reason why they start
up a business. It is the financial return or the reward that the company aims to achieve
to reflect the risk that they take. Profit also provide incentives for firms to increase
production or build more projects and is necessary for the survival and growth of a
business.
Social Responsibility
Ayala land institutionalized sustainability in the company for more than ten years,
their pursuit of environmental, social and economic value creation continues to evolve.
Ayala Land Inc. has again been listed in The Sustainability Yearbook 2018 as one of
the most sustainable companies in the world, once more making it the only Philippine
company included in this year’s edition. The Sustainability Yearbook is the world’s
most comprehensive publication on corporate sustainability. The company has
recently committed to nurture around 450 hectares of land as carbon forests. The
carbon forests will be spread across five sites in Alaminos, Laguna (133 has.);
Sicogon, Iloilo (148 has.); Lio, Palawan (50 has.); Kan-Irag, Cebu (63 has.) and
Talomo, Davao City (54 has.) which together are estimated to store 68,000 metric tons
of CO2 to date. While Megaworld Foundation successfully reached out to 15 regions
and forged over 270 partnerships. They strive to strengthen country's education system
in any way they can, from constructing classrooms and providing school facilities to
research sponsorships. They have supported 5,800 scholarships grants and have
supported 400 scholars each year. They also support welfare projects by giving
financial assistance to the children, youth, women and the elderly, improve delivery of
Philippine health care by donating to major hospitals and institutions and lastly they
partnered with institutions to help answer current environmental issues. While SM
Prime Holdings Inc. has SM Cares, a division of SM Foundation Inc. that handles the
corporate social responsibility programs of SMPH. There are programs that focus on
the Environment, the People and Communities. Among the initiatives include:
Awareness programs with the Green Retail Agenda, Air Quality Management,
Children and Youth Development, PWDs (Persons with Disability, Elderly Care,
Women and Breastfeeding Moms. Being a socially responsible company is an
important factor because aside from helping the community, building relationship with
customers, and the neighborhoods, it can also boost the company's image and build its
brand. When a company is involved in the community, it makes them stand out from
the competition.
Market Share
In year 2019, SM Prime Holdings became the first Philippine company to reach 1
trillion in market capitalization with PHP 1,200,000,000,000 and 34.55 market price
which dominates the other two company while Ayala land Inc. comes in second with
PHP 729,500,000,000 with 49.50 market price and comes last Megaworld Corporation
with 166,640,000,000 market capitalization with market price of 5.19. Market
capitalization is an important factor in business because it allows the investors to
understand the real size of one company versus another. It is referred to as the total
value of all company's shares of stock and measures what a company is worth in the
open market, as well as the market's perception of its future forecasts because it
reflects what investors are willing to pay for its stock.

Products/Services offered
When it come to real estate properties offered SM Prime Holdings offered 72
malls, 63 residential projects, 11 office buildings, 6 hotels with 1,510 hotel rooms
which shows that SM prime dominated in terms of real estate properties compared to
Ayala Land Inc. which has 62 malls, 5 residential developer, 38 offices and 2,583
hotel rooms. And lastly Megaworld which has 19 lifestyle malls, 63 office towers, 24
townships and 9 hotels with 2554 rooms. Products and services offered is a also a very
important factor in one's business since you will not earn a profit without giving or
selling in return. Without products and services offered there will be no sales.
Company Reputation / Public Image
Megaworld Group bags most number of major awards. The three-time “Best
Developer” Megaworld, asserted its industry dominance once again by winning 12
major awards at the 2019 Philippines Property Awards. While Ayala Land recently
received the 3G Environmental Sustainability Award 2019 at the 4th Global Good
Governance Awards. They was recognized for its efforts to incorporate the concept of
environmental protection into its business operations and to impart the best
environmental responsibility practices throughout its organization. While SM Prime
Holdings received Top Ten Taxpayers Awards from the City of Manila at the 447th
Araw ng Maynila celebration last June 22, 2017. SM received an award for placing
fourth in the ‘Top Real Property Taxpayers’ category and third in the ‘Top Business
Taxpayers’ category for SM City Manila and SM City San Lazaro despite having an
issue when the Cebu City Prosecutor’s Office has found probable cause to charge an
official of SM Prime Holdings for violation of Article 318 of the Revised Penal Code
for allegedly misrepresenting the size of its building to reduce its tax obligation to the
Cebu City Government. Having a good reputation is an important factor in business
since customers decide whether they will buy a product/services or not based on the
information and opinions that they hear or see. So having a good reputation attracts
customers to engage in one's business.
Price Competitiveness
We based the price competitiveness on the price per residential unit of the
companies. Today, Megaworld prices of residential units in Park McKinley West rose
to almost P265,000 per square meter. Units are sized from 70.5 sq.m for one-bedroom,
up to 110 sq.m for two-bedroom, up to 212 sq.m for three-bedroom, up to 229 sq.m
for four-bedroom, and up to 336 sq.m for five-bedroom. While Ayala Land Park
Central South Tower, ultra-luxury two-tower development will sell for an average
price of about P300,000 per square meter. While SM Prime Holdings 54-storey The
Estate, will be the tallest and most expensive residential tower along Ayala Avenue is
now selling for P530,000 per square meter. Price is important for the success of
business since this is one of the factors that buyers want to know first when it comes to
buying a product or services. Price competitiveness also defines the value of what the
product is worth and has a huge impact in increasing profits.
Market Penetration
Having a high market penetration is an advantage since it enables to reach more
potential customers because of the company’s established brand and products. It

determines how well known a company is in its industry. We based the market
penetration by the increase in the volume of sales. For Megaworld, its sales amounted
to an increase of 18% for the first quarter of 2019, while its competitors Ayala Land,
its sales increased to 12% and SM Prime Holdings’ sales rose by 14%.
Number of Store Locations
Locations affect the real estate industry because a lot of people prefer to live in a
place that is accessible wherein all their needs can be easily addressed. Having many
locations means that the company is successful and continues to grow. Megaworlds’
real estates are strategically situated at 15 different regions of the country while Ayala
Land at 16 regions and SM Prime Holdings at 10 key areas of Metro Manila.
Global Distribution Network
A distribution network that is wide, fast, and reliable is essential that gratifies the
society of customers. SM Prime Holdings has the largest distribution network that
consists of 26 international offices followed by Megaworld with 12 international
offices and lastly, Ayala Land with only a few international offices.
Competitive Profile Matrix (CPM)

Megaworld Ayala Land
SM Prime Holdings
Corporation Inc.
Critical
Scor
Success Weight Rating Rating Score Rating Score
e
Factors
Financial Profit 0.16 2 0.32 3 0.48 4 0.64
Social
0.10 3 0.30 4 0.40 2 0.20
Reponsibility
Market Share 0.09 2 0.18 3 0.27 4 0.36
Product/Services 0.11 2 0.22 3 0.33 4 0.44
Offered
Company
0.08 3 0.24 4 0.32 2 0.16
Reputation
Price
0.15 4 0.60 2 0.30 3 0.45
Competitiveness
Market
0.14 4 0.56 2 0.28 3 0.42
Penetration
Number of Store
0.08 3 0.24 4 0.32 2 0.16
Locations
Global
Distribution 0.09 3 0.27 2 0.18 4 0.36
Network
Totals 1.00 2.93 2.88 3.19
B.2 Porter’s Five Forces Framework of Competitive Analysis
Porter’s Five Forces
Bargaining Power of Suppliers – MODERATE
The supplies of a real estate business is mostly composed of raw materials that
could be bought from construction contractors. Prices of raw materials fluctuate with
world prices due to various providers of raw materials in which opens an opportunity
to differentiate the prices and select the best price for great quality.
Bargaining Power of Buyers – LOW
The bargaining power of buyers is low because acquiring a real estate is costly
that requires to spend a huge cash expenditure that prevents buyer from buying in
bulks. Since the cost of making a real estate is high, it is expected that the price of
acquiring it is expensive too. It is also essential to buy a home because it is one of the
basic needs of people.
Threat of New Entrants – LOW
Investing in a real estate business needs a huge amount of capital in order to have
a competitive advantage among other competitors. The cost of inquiring capital like
land and raw materials is expensive and investment payback is not that easy.
Threat of Substitutes – HIGH
The threat of substitutes is high because of the alternatives that are available like
those apartment rentals which is more inexpensive. Not all people could afford to buy
their own homes because of factors that affect their livelihood like employment and
income.
Threat of Competitive Rivarly- HIGH
We assessed this threat as high because of its competitors like Ayala Land and
SM Prime Holdings that are well-known in the real estate industry.
C. Summary and Conclusion

External Factor Evaluation (EFE) Mix
In order to achieve better evaluation of the position of the Megaworld Corporation
financially and economically in the field and industry it belongs to, External Factor
Evaluation (EFE) Matrix is used. Conclusion and summary are formulated with
external and internal industry analyzations by the use of PESTEL Analysis, Porter’s
Five Forces and Competitive Profile Matrix (CPM).
External Factor Evaluation (EFE) Matrix

Rating: Company’s response to the external factor.
1=Poor 2=Average 3=Above Average 4=Superior
Opportunities
1. Emergence Of New Trends Regarding Community-based Lifestyle

Rating 4 – According to a Business World report, there are 1.3 million freelancers
in the Philippines as of March 2018, and the figure continues to increase. The cultural
shift led by the millennial generation to a community-based lifestyle will initiate the
popularity of co-working and co-living in the Philippines. The growing demand for co-
working spaces will open opportunities and encourage Megaworld Corporation to
increase their presence and improve business activities.
2. Build Build Build Program
Rating 3 – Among the segments that will benefit from the government’s
infrastructure, thrust is property development. It added infrastructure implementation,
with decentralization, will help spur the growth of office, residential, retail, industrial
and hotel and leisure segments. Megaworld Corporation is rushing to acquire parcels of
land for development in reclaimed areas by the BBB Program.
3. Population Growth
Rating 3 – Megaworld Corporation will continue to build estates around the
country that are seen as centers of growth, connectivity and sustainability. MEG is a
pioneer in creating mixed-use developments. At a recent a gathering of the real-estate
industry’s thought leaders organized by online property group, stated that over 50% of
the world’s population now live in urban areas and this could reach 80% by the end of
the century.
4. Technological Advancements
Rating 4 – Technological sophistication in the real estate industry seems to be in
comparison to the advancements in other industries such as medicine, aerospace, and
even technology itself. The existence of technology, or the ability to build the kind of
technology sophisticated enough to address the challenges more effectively, is not the
problem for real estate. MEG is one of the biggest companies in the Philippines, so it
will be easy for them to follow technological advancements and trends.
5. Ability of Foreigners to Invest in Real Estate Properties
Rating 4 – In Foreign Investments Act of 1991 (FIA), foreign companies and
investors can acquire lands as long as these are privately owned and foreign equity
doesn't surpass the 40% cap. The foreign ownership of Megaworld will increase to
20.63 percent from the previous 16.84 percent, while its public float will be reduced to
31.87 percent from 33.67 percent.
6. China-United States Trade War
Rating 2 - The current disputes between China and the US, make other countries,
such as the Philippines, more attractive to other foreign investors. This is an opportunity
for Megaworld Corporation to market its high end real estates to upper class foreign
businessmen.
Threats
1. High Inflation Rate
Rating 4 – In terms of the inflation here in the Philippines, Megaworld is doing
well in the management of costs and funds for its operations. Despite fast-rising
consumer prices and interest rates, residential condominium take up in Metro Manila hit
a record high and home buyers demanded for more aside from the new units brought to
the market by property developers.
2. Consumer Behavior on Continuous Increase of CPI
Rating 3 – Megaworld Corporation offers diverse and mixed-used communities
which are available to middle to high-income earners. The volume of residential
condominium units sold ahead of completion last year exceeded the new preselling units
rolled out by property developers.
3. Drastic Changes Due to Proposed Federal Charter
Rating 2 – The challenge to a federalism shift boils down to the Filipino public’s
approval of the bill’s passage. According to Philippine Chamber of Commerce and
Industry and the Joint Foreign Chambers of the Philippines, small businesses want
federalism, but the bigger ones do not prefer it, although they also noted that some big
corporations are open to it. Megaworld Corporation may remain critical about a
fundamental shift in the system of government. Since the 60-40 economic restrictions
will stay under the proposed amendment, foreign businesses would still face challenges
to operate under this provision.
4. Extreme Climate Change and Natural Calamities
Rating 4 – Megaworld Corporation doesn’t have control on natural occurrences
however, they have been working hard to achieve and fulfill its responsibilities
concerning environmental issues. Megaworld has always taken the initiative to protect
the environment. To fulfill this commitment, the Company initiates and participates in
various activities, including treeplanting. The Company’s ArcoVia City is set to have
over 1,000 trees as part of this green movement.
5. Chronic infrastructure underinvestment
Rating 2 – Liberalization and privatization resulted to chronic infrastructure
underinvestment. It has elevated risk of short- and long-term economic drag.
Megaworld Corporation may face challenges because like all real estate developer, it
depends on well-maintained, reliable infrastructure, such as reliable utilities, efficient
roads, and transit routes but with its good financial position, it can minimize the
negative effects of this.
6. China-United States Trade War
The trade war between China and the US can also be a threat because of the
imposed increased taxes on the goods or products from the respective countries. This
may increase the prices of raw materials needed in real-estate that are imported from
China or the US.


Real Estate Industry Analysis in Metro Manila

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Colegio de San Juan de Letran

COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

B. Industry and Competitor Analysis

B.1 Industry Analysis

industry contributed a total of 3.2% to the country’s 2017 GDP.

Here are the different segments of a real estate company.

Location AS OF 2017 2018 2019

Metro Manila Residential Condominium Launches and Take Up

of vacancy by 2018 before normalizing at lower rates by 2019.

BUILDING LOCATION GLA, sqm

Menarco Tower Fort 25,400

from Makati and Fort Bonifacio.

c) Hotel and leisure

Metro Manila New Hotel Room Stock

Metro Manila New Hotel Room Stock

markets such as South Korea, United States, China, and Japan.

Metro Manila Visitors’ Arrival Percentage

department’s 17% or 7 million tourists. A total of 2.88 million international tourists

between 60%-65% from 2019 to 2020 due to projected new completions.

been disbursed for office development alone.

2. Market Share Analysis

Megaworld Corporation Ayala Land Inc. SM Primes Holding Inc.

According to Forbes, Megaworld ranked #1236 in terms of its market value

competitor we used the market capitalization.

look at places like Metro Manilla.

development of business districts, particularly to the developers targeting the BPO

properties or attract and retain tenants.

greatly in the organization.

The main categories of a real estate are:

 Residential- are those consist of housing for individuals, families, or groups of

activities such as factories, mechanical productions, research and development,

construction, transportation, logistics, and warehousing.

The average price of a luxury 3-bedroom condominium unit in Makati central

business district (CBD) soared 15.55% (9.91% inflation-adjusted) during 2018 to

according to Colliers International. During the latest quarter, condominium prices in

Makati CBD increased 5.02% (5.55% inflation-adjusted) in Q4 2018.

 Condominium units saw y-o-y price increase of 5.8% (-0.8% inflation-

adjusted) in Q3 2018 from a year earlier

 For single detached/attached house, prices rose by a meager 0.2% (-6.1%

inflation-adjusted) during the year to Q3 2018

 Duplex house prices surged 30.7% (22.5% inflation-adjusted) y-o-y in Q3

 Townhouse prices rose by 18.3% (10.9% inflation-adjusted) over the same

and the regulation given by the government.

primarily engaged in the development of large-scale, mixed-use, master-planned

townships that integrate residential, commercial, and office developments. Townships

respective market of each development. Founded in 1989, the Company initially

established a reputation for building high-quality residential condominiums and

commercial properties in certified first choice locations in Metro Manila. Beginning in

1996, in response to demand for a lifestyle of convenience, the Company began to

focus on the development townships beginning with Eastwood City.”

NCR | Geohazard Map Philippines

the purpose is to convince people to have an interest in the company.

accepts their terms.

advantageous promotion. There are a variety of approaches to contest-based

possible.A popular approach to the straight-up giveaway method is to treat it like a

promote your brand exposure.

The customers of a real estate industry could be labeled as an individual who

makes a buying decision of residential condominiums or commercial properties. Other

Philippines. The middle-income class is known to earn an average of P36,934 per

In the Philippines, the number of employed persons increased to 42,953 in the

5. Factors Affecting the Cost of Doing Business

Demographics are the data that describes the composition of a population, such as

real estate trends.