Office Vacancies to Rise Through 2018

Jones Lang Lasalle

AS more office buildings enter the market to fill robust demand mainly from the business outsourcing sector, office vacancy rates in Metro Manila might go on edging higher through the next three years, said global property monitor Jones Lang Lasalle (JLL).

“The large upcoming volume of office space may slightly push vacancies upwards in the next three years,” JLL said in its office property outlook for 2016 published Wednesday.

JLL said the average vacancy rate across Metro Manila as of end-2015 was six percent, and this could continue to slightly go up until 2018.

At end-2015, total stock of existing Prime and Grade A office space within Metro Manila was estimated at 5.6 million square meters, JLL said.

It noted that the Makati and Ortigas business districts now has the highest concentration of Grade A office space, with approximately 1.3 million square meters and 1.4 square meters, respectively.

Around 2.9 million square meters of office space is distributed across emerging urban districts: Bonifacio Global City and McKinley Hill in Taguig City; Eastwood City, UP Ayala Technohub, Eton Centris, and Araneta Center in Quezon City; Filinvest City and Madrigal Business Park in Alabang, Muntinlupa; and Bay City, still down south of Metro Manila.

From 2016 to 2018, JLL estimated, about 2.4 million square meters of new office space is expected to enter the Metro Manila market.

This includes, at least for the first semester, the Silver City 4 and 5 by Ortigas & Company Ltd. In Ortigas, the Bonifacio Stopover Corporate Center by Ayala Land Inc., the
Metrobank Center by Federal Land, and the Uptown Place Tower 2 by Megaworld Corp. in BGC, the UP Town Corporate Center by ALI in Quezon City, the Filinvest Cyberzone Pasay Tower in Bay City, the South Park Corporate Center by ALI in Alabang, and the McKinley West Campus buildings of Megaworld in McKinley Hill.

But JLL stressed that vacancy levels would stay manageable, as the main occupiers, the business process outsourcing (BPO) firms, would also keep on coming.

“Nonetheless as Metro Manila remains one of the most preferred destinations for outsourcing, the continued entry and expansion of O&O firms will likely keep vacancy rates within manageable levels,” JLL said.

Such steady demand likewise kept rental rates from going up.

In a separate report, US-based property advisor CBRE said rental growth in Southeast
Asia, including the Philippines, was weakest in 2015.

CBRE said was on the back of continued growth in office demand across Asia Pacific last year.

CBRE said small-to-medium office requirements from tech start-ups and domestic financial companies generally drove office demand in the region.

“Cost-saving will remain at the top of the occupier agenda, particularly among multinationals, but domestic and Asian companies will continue to exhibit leasing activity,” CBRE said. “Tech will remain the most active sector.”

Looking ahead, JLL said positive investor sentiment is likely to be sustained, supporting steady growth in capital values of around three to four percent in the next three years.

“The Philippine economic outlook remains healthy amid China’s slowdown and the volatility of the global financial markets,” JLL said. “Further growth in domestic demand, as well as the robust macroeconomic fundamentals may prompt investor interest in the office market to grow further.”



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