Traditional office now driving demand
Traditional users have overtaken the IT-business process management (IT-BPM) sector in terms of office space demand as the latter continues to face uncertainties in the local business environment.
In its Q2 Metro Manila Office Market Overview, Pronove Tai International Property Consultants disclosed that traditional office users largely from construction and architecture companies (32 percent), banking and finance (16 percent), insurance (15 percent), real estate (8 percent) and medical and healthcare (6 percent) among others were the main demand drivers with its take up growing by 16 percent in the second quarter.
Data from Pronove Tai showed that traditional offices accounted for the biggest share at 43 percent of the total take up (214,000 sqm) in the second quarter, followed by the IT-BPM sector at 32 percent, and offshore gaming at 24 percent.
“Former top demand driver IT-BPM dropped to No. 2 in terms of actual take up in the second quarter,” said Pronove Tai CEO Monique Pronove.
“IT-BPM saw a 50-percent decrease from 135,000 sqm in the first quarter to only 69,000 sqm in the second quarter. This was a significant drop and definitely something we should watch out for in the coming quarters,” Pronove said.
“The slowdown in terms of take up from IT-BPM could be attributed to the uncertainties brought about by the second package of TRAIN (Tax Reform for Acceleration and Inclusion),” she continued.
Pronove also pointed out that offshore gaming, while the third strongest demand driver, is “still unwelcome.”
Offshore gaming take-up, in fact, increased by 6 percent quarter on quarter as evidenced by the new absorption of POGO offices in the cities of Las Piñas, Mandaluyong, and Pasig.
“Despite being a strong demand driver, the Philippine Offshore Gaming Operators (POGO) faced challenges in being absorbed into their preferred office buildings. POGOs are a huge market but there are difficulties for them in terms of perception. We have advised our clients to look at POGO in the perspective of how manning agencies and call centers have evolved,” Pronove explained.
Meanwhile, Pronove Tai reported that approximately 194,000 sqm of office completions were added to the office stock in the second quarter.
Of this new supply, 40 percent or 77,000 sqm came from buildings completed in the Bay Area. The Bay Area (Pasay City and Paranaque City) regained its position as the fastest growing district with a 10 percent growth in stock after registering no completion in the prior quarter.
Muntinlupa City also posted notable growth at 8 percent or 39,000 sqm.
Still the largest office district, Makati City accounts for 3.3 million sqm or 33 percent of the total 10.2 million sqm stock as of end June 2018. Makati City is followed by Taguig City and Ortigas Center at 2 million sqm and 1.6 million sqm, respectively.
While Mandaluyong City and Quezon City recorded vacancy rates of 12 percent and 10 percent, respectively, all the other districts recorded unhealthy levels below 5 percent. In particular, Muntinlupa City was at the lowest at 1 percent, Makati City remained tight at 2 percent, and Bay Area at 3 percent.
Makati City also maintained its position as the preferred destination for offices as 34 percent of the total actual take up in the second quarter came from Makati, followed by Ortigas.
“The country’s premier business district was still where most of the demand had been. This has resulted in an increase of 4 percent from the previous quarter. Average monthly rentals of Grade A building was at around P 1,500 per sqm a month. Makati rentals are at a 24 percent premium over Taguig City,” Pronove said.
“There was a general atmosphere of uncertainty within the business sector. We should allay this by ensuring a stable and predictable business environment as well as by speeding up the implementation of the Ease of Doing Business Act,” Pronove concluded.
