KMC Savills Inc. said that, in 2017, Metro Manila saw the highest number of completions to date at around 761,100 square meters (sq m) of gross leasable area (GLA).
“Despite the significant additions, the market exceeded expectations, as net absorption surged to 629,500 sq m and brought vacancies to just 4.5 percent of total stock by the end of the year,” the real-estate services firm said in a report released on February 20.
According to KMC Savills, while rental growth spiked in the Bay Area in the fourth quarter of 2017, average rents in Metro Manila grew at a more moderate rate of 3.5 percent year-on-year.
The Bay Area refers to the reclamation area on Manila Bay located west of Roxas Boulevard and the Manila–Cavite Expressway.
Rental growth in Bonifacio Global City (BGC), Taguig, was subpar in the fourth quarter of 2017, “which we believe is a result of changing market dynamics—rising vacancies coupled with a substantial office pipeline.”
“In addition, the contrasting rental performance between submarkets highlights the locational preference of the Philippine offshore gaming operator sector,” KMC Savills said.
The company said it sees the current year as “another challenging year for the office market as another 805,000 sq m of GLA is estimated to be online.”
“More than a third of the pipeline will be in BGC, while Quezon City will welcome close to a quarter of Metro Manila’s new supply,” KMC Savills said. “Quezon City may yet again drag the overall market performance this year, but this should be mitigated by other submarkets with impressive absorption rates.”
The company said it expects mixed results from the various submarkets in Metro Manila in the coming quarters, which would be “due to the diversifying pool of occupiers.”
“As such, certain occupiers may be faced with varying degrees of difficulty securing affordable rates in certain areas, such as the Bay Area,” KMC Savills said. “On the other hand, occupier demand is still seen to be intact despite another record year of office completions in the market.”