METRO Manila is fast becoming an attractive cosmopolitan destination for global business locators due to its competitive office market on a par with its Asian peers, said real estate service provider Santos Knight Frank Inc. (SKF).
Based on Knight Frank’s Asia-Pacific Prime Office Rental Index report for the second quarter of 2017, Metro Manila is ranked third with the cheapest office rate of $18.2 per square meter (sq m) a month, next only to Bengaluru (formerly Bangalore) in India ($17.5 per sq m monthly) and Kuala Lumpur in Malaysia ($13.1 per sq m monthly).
Because of this, more and more international companies are encouraged to set up their headquarters here, according to SKF Associate Director for Investment and Capital Markets Kash Aristotle B. Salvador.
“And it still boils down to land values. We haven’t been such a sophisticated or complicated market. That’s why we’re still relatively cheap,” he told the BusinessMirror recently at a sideline interview during the company’s news briefing in Makati City.
The supply of office space and leasing activity, he added, could also be attributed to the reasonable rental fees in Metro Manila at present.
“The more activity there is, it’s possible that prices will increase. For example, if you’re a developer and you [only] have this amount of capital, you can build one now. You can’t build so much more because you’re limited by your capital. If you have so much capital and you build and the activity goes higher, then you can increase your capital values and also your rents,” he explained.
Since 2011 the rates of premium workspaces in Metro Manila have increased between 5 percent and 6 percent.
Such growth is comparable in the region, according to SKF chairman and CEO Rick Santos.
“A fast-growing metropolis, Metro Manila’s property market remains robust vis-à- vis several Asian cities,” he said.
Most recently, prime-office rents in Metro Manila hiked by 3.4 percent year-on-year (YoY) during the second quarter of this year.
This is higher than Taipei (2.8 percent), Beijing (-1.9 percent), Kuala Lumpur (-1.7 percent), Shanghai (-2.0 percent), Singapore (-5.1 percent) and Jakarta (-8.3 percent).
Despite this, however, Metro Manila had one of the lowest vacancy rates in this category at 3.4 percent across Asia-Pacific region during the same period.
Knight Frank Asia Pacific Head of Research Nicholas Holt lauded the strong result of the local office market and expects it to continue next year.
“On a regional basis, the performance and fundamentals of the Manila office market look solid. While some of the other Southeast Asian markets are seeing demand remain sluggish and the major Chinese cities are seeing huge amounts of new supply, the Manila market has one of the tightest vacancy rates in the region and looks set for a strong 2018,” he said.
Inventory-wise, there were 132,916.73 sq m of office space added to Metro Manila’s office stock from April to June of this year, which contributed to 3.51-percent vacancy rate, or 151,589.95 sq m unoccupied space during the time. Overall, vacancy rose above 3 percent with the introduction of new supply in Bonifacio Global City and the Bay Area.
Occupancy rating was 96.49 percent as net absorption stood at 100,626.01 sq m. Aside from business-process outsourcing companies, offshore gaming is another major demand driver boosting Metro Manila’s office-market growth. The latter is projected to continue to become a major player in space take-up.
“It’s possible also that traditional offices, like big companies, transfer from a different area to another to absorb office space. I think we are, likewise, going toward very efficient use of space. That’s why we have seen the rise of coworking space,” Salvador said.
The weighing average lease rate was P910.30 per sq m monthly, or more than 1 percent from the first quarter of 2017 and 5.1 percent YoY. Makati constantly had the highest asking fees compared to all key central business districts in Metro Manila.
“Over the next four years, Manila will see more than 3 million sq m of new office space added to the market. About 2 million sq m of residential space and half-a-million sq m more for retail will come online by 2019,” Santos revealed.