Big jump in office space inventory seen

Metro Manila is likely to see a record-high increase in office space inventory this year and next as property developers harness growth from the expansion of the business process outsourcing (BPO) industry.

For the prospective tenants, this is seen as an opportunity to pick from a wider choice of offerings at slightly lower cost while for the landlords, this suggests a softening in rental rate and an uptick in vacancy rate.

Julius Guevara, director for research and advisory at Colliers Philippines, said there would likely be 709,675 square meters of net usable office space to be added to Metro Manila this year and another 781,531 sqm in 2017. By 2018, total inventory in the metropolis is estimated to reach 9.38 million sqm, with an additional 408,049 sqm of office stock expected to be completed that year.

In 2015, 484,092 sqm of new office supply were delivered.

“Because of the increase in supply—we’ve never seen these levels before—we do think there will be a softening in rental rate in various CBDs (central business districts) by the end of the year,” Guevara said in a recent briefing.

Rental rate in both Makati and BGC was seen to decline by 3 percent in the next 12 months while rental rate in Ortigas was forecast to ease by 1 to 2 percent. A 3- to 4-percent slowdown is projected for Alabang while rental rate was seen to be flat in Quezon City.

The influx of new supply was also seen to result in an increase in vacancy rates in Metro Manila to about 5.6 percent, Guevara said, although he pointed out that Colliers had scaled back its forecast vacancy rate from 6.8 percent previously given the delays in some of the projects and the strong demand from BPOs.

As of end-2015, the average vacancy rate in Makati CBD for all office building grades stood at 2.14 percent, which is projected to rise to 2.3 percent. On the other hand, vacancies in Bonifacio Global City increased to 6.7 percent from 3.95 percent in the third quarter as seven new buildings were completed in the fourth quarter of 2015. In Ortigas Center, strong demand for space continued to drive vacancies lower, with the rate falling to 1.91 percent in the fourth quarter from 2.36 percent in the previous quarter.