BOUYED by last year’s robust performance, the Philippine office market is expected to continue its growth trajectory in 2018, according to Pronove Tai International Property Consultants (PTIPC).
“2017 was a positive year for the office market. We are cautiously optimistic that 2018 will be a strong year for the industry, as well,” PTIPC CEO Monique Pronove said.
The company’s 2017 Metro Manila Office Market Overview report shows that pre-leased supply for 2018 as of December last year stands at a strong 43 percent, or 354,000 square meters (sq m), or almost double the 23 percent or 288,000 sq m already committed last year.
This bodes well for the office market showing signs of sustaining its growth in 2017, according to the top executive.
Of the pre-absorbed space for this year, traditional office has taken up 60 percent, or 211,000 sq m, while the balance of 143,000 sq m belongs to information technology-business process management (IT-BPM).
“While we noticed a slowdown in IT-BPM take-up, Pogos [Philippine Offshore Gaming Operators] buoyed us over in 2017,” Pronove said.
The former pre-rented 316,000 sq m or 41 percent of office stocks last year, followed by the latter at 35 percent or 275,000 sq m.
“Pogo had a strong take-up despite being only allowed in Makati and Pasay. If not for this sector, vacancy rates would have gone up to 8 percent in Metro Manila,” she added.
With 100-percent delivery rate, 46 new buildings housing 1.2 million sq m of leasable office space had been added to the existing inventory in 2017.
“This is the highest supply in Philippine history and is a marked improvement from last year’s delays, delivering only 49 percent,” Pronove said.
Still the largest office district in the metropolis, Makati City has 3.3 million sq m of the 9.7 million sq m total office stock as of end last year.
Taguig City is now at the second spot at 1.9 million sq m, with the biggest contribution of 432,000 sq m to 2017 supply.
It has overtaken Ortigas Center with pre-commitments of 1.6 million sq m.
In terms of growth, Bay Area remains the fastest-growing office district at 55 percent or 268,000 sq m new supply in 2017 for a total stock of 753,000 sq m.
“[The year] 2017 saw Metro Manila office-vacancy levels rise to a healthy 5 percent for the first time in seven years,” the CEO said.
She attributed this to acceleration of construction and completion of long overdue buildings from the past years.
“Having said that, Makati City still has very low vacancy rate at 3 percent,” Pronove said. “This is tight and uncomfortable for businesses to grow within the same building or even within the city.”
Quezon City has the highest vacancy rate at 11 percent, followed by Mandaluyong at 8 percent and Taguig City at 7 percent.
Rate-wise, Makati continues to have the most expensive asking monthly lease price in the country at P1,460 per sq m.
Meanwhile, Taguig has the highest rental growth in Metro Manila at 26 percent year-on-year.
In fact, Makati City rental rate has 23 percent premium ending December 2017.
“Again, this could have gone higher were it not for the stumbling blocks I mentioned,” Pronove said. “This would then encourage decentralization of economic activity to other more affordable cities nationwide.”