Bright prospects seen for PH office market
Metro Manila continues to be the most cost-effective office destination, outperforming 18 other central business districts, according to real estate services and advisory firm CB Richard Ellis (CBRE) Philippines.
As economies in the West tighten, CBRE pointed out that the strong demand for alternative office locations has pointed multinational companies toward Asia and has opened opportunities for the Philippines.
“The Philippines is becoming the lifeboat for many US and European companies that need to outsource in order for their businesses to survive and actually preserve jobs back in the US and Europe,” noted CBRE chairman and CEO Rick Santos. “All eyes are now moving from BRIC [Brazil, Russia, India, China] economies to TIP [Turkey, Indonesia, Philippines] economies.”
Based on data provided by CBRE, the average office lease rates in Metro Manila stood at $22 per square foot a year. In contrast, the top six countries that have the highest rates were Hong Kong-Core Central with $200; Beijing CBD with $173; Tokyo, $162; Shanghai-Puxi, $121; and Mumbai-BKC and Singapore, $117.
On a local note, however, rental rates in Metro Manila CBDs, namely, Makati, Fort Bonifacio, Ortigas, Alabang and Quezon City, have noticeably increased in the first quarter of 2012 as against the previous year’s levels.
These rate increases, CBRE noted, could be attributed to tight office space supply and strong pre-leasing demand.
“Pre-leasing is back. The office sector goes from strength to strength, with a surge of pre-leasing commitments in the central business districts,” Santos said. He noted that these pre-commitments were being sustained by several factors, including cost anticipation, securing space, expansion and consolidation.
According to CBRE, office space demand was catching up with supply, particularly in the major business districts where office space requirements were on a steady uptake with no signs of a slowdown. Average occupancy rates during the first quarter of this year hovered at 96 percent.
CBRE explained that the sustained expansion of the outsourcing and off-shoring industries, as well as the limited tenant turnover, continued to put pressure on the already tight supply.
Although new supply of traditional and BPO office space was scheduled to come online in the second half of this year, it was not expected to do much to alleviate the situation, the firm noted.
As it is, of the 293,000 square meters of anticipated new supply, about 232,000 square meters have been pre-committed. The limited supply continued to put an upward pressure on office lease rates, CBRE said.
“We urge developers to push through with their planned projects and to avoid any delays and to capture all potential investments in the country. Developers with multiple office projects in their pipeline have the advantage over other developers as these provide confidence to lessee’s expansion projections,” CBRE said.
“Office market will continue to be active and (it is guaranteed to be at its peak in) the next two years,” it added.—Amy R. Remo
