Premium and Grade A office space takeup in Metro Manila's main business districts (CBDs) continued to accelerate in Q315 due to strong pre-leasing activity, according to the most recent Office Briefing published by Savills international associate KMC MAG Group, a Philippines real estate services firm.
More than 200,000 sq m (232,961) was newly delivered in Q3, and almost everything was snapped up, at 231,412 sq m - a record takeup rate.
"Most of the new spaces delivered have been pre-leased prior to completion; that is why takeup is very high," said Michael McCullough, KMC MAG Managing Director.
Upcoming supply is estimated to reach around 1.8-million sq m in
2018. Despite the significant amount of supply, KMC MAG says
that overall office rental and vacancy rates are expected to remain
stable given the strong pre-leasing activity.
"We continue to see interest from both local and foreign firms across
all CBDs, although most of the interest is currently in Bonifacio Global City (BGC) only
because it is where most of the new supply will come from," said
"The profiles of companies who have pre-leased or are currently
pre-leasing space vary across all CBDs. Ortigas, Bay Area, and Quezon
City are very attractive to new IT-BPO firms who are just starting to
outsource services and processes to the Philippines because of the lower rates.
"Makati remains the CBD of choice for large-scale enterprises who
want to upgrade their headquarters and move to a better location,
however many firms are forced to look towards BGC due to the lack of
available and suitable space."
Thanks to the sustained IT-BPO industry demand and the relatively low
level of new supply in these areas, Bay Area and Quezon City are
projected to have the lowest vacancy rates and strongest rental rate
growth among the business districts within the next 12 months.
In Q3, the Bay Area recorded a 17% year on year (YoY) rental rate growth, with Grade A rentals averaging from Php673.4 to Php700 per sq m/month and an ultra-low 1.3% vacancy rate.
Meanwhile, Quezon City posted an 8.5% YoY growth, with average Grade A office rates ranging from Php700.4 to Php750.0
per sq m/month. Located in the northernmost part of Metro Manila, Quezon City boasts vacancy rates of under 1% with only 0.2% of its total
stock unoccupied, making it the best performing CBD in the country this
Makati, on the other hand, remains as the premium CBD, posting a
4.3% YoY growth with the highest asking net Grade A rental rates
averaging Php 979.1 to Php 1400.0 per sq
m/month. In spite of this, Makati's vacancy rate remains low at 3%,
and is likely to become lower once Tower 6789 becomes fully occupied.
BGC comes in next, with a rental growth of 3.7% YoY and an average asking rental rate of Php860.4 to Php1,100
per sq m/month. The district's vacancy rate increased slightly to 2.6%;
however, it should be noted that this is because it has absorbed most of
the new demand, allowing it to post its highest recorded quarterly
takeup since Q114 of 49,639 sq m.
Ortigas' growth remains strong at 6.8% YoY, bringing average rental rates up to Php624.6 per sq m/month, with an upper rate of Php750 per sq m/month. Ortigas' strong rental growth is expected to continue,
given its current 2.5% vacancy rate and lack of new supply until the end
Alabang is the only CBD office market with sluggish growth. YoY growth was 0.6% and vacancy rates 16%. This brought down the average asking
rental rates to Php 605.3per sq m/month in Q315 from Php601.8 per sq m/month a year ago.
Read the report (PDF)