Metro office space vacancy tightened in first quarter

MANILA, Philippines—Office space vacancy in Metro Manila’s commercial districts has further tightened on the back of robust demand from business process outsourcing (BPO) companies despite rising rental rates during the first quarter of 2014, according to global real estate adviser Cushman & Wakefield.

In its latest MarketBeat Office Snapshot report for the Philippines, Cushman & Wakefield noted that the overall vacancy rate in Metro Manila stood at 2.58 percent during the first three months of the year, which was lower by 1.21 percentage points quarter on quarter and 0.89 percentage point year on year.

In the first quarter, the vacancy rate at the Bonifacio Global City (BCG) and McKinley Hill in Taguig City was the lowest at 1.2 percent. The vacancy rate in Quezon City was at 2.1 percent; 2.42 percent at the Makati central business district (CBD); and 2.49 percent at the Ortigas Center. Down south at the Filinvest Corporate Center in Alabang, Muntinlupa City, 4.71 percent of office space was vacant.

The five Metro Manila office submarkets had a total of more than 6 million square meters of inventory, while more than 1.08 million square meters of office space are currently under construction. Overall direct net absorption stood at 134,049 square meters.

“The office sector remained strong during the first quarter of 2014, as demand from the BPO sector continued its positive historical trends. BPO firms continued to take up large blocks of space, including whole floors,” the report read.

Direct asking rental rates for grade A space went up to an average of P763.50 per square meter per month during the first quarter from P737.20 in the fourth quarter of last year.

Monthly lease rates for office space in Makati City rose to P1,038 a square meter from P1,006 in the previous quarter; P650 a square meter (from P600) at Filinvest Corporate City; and P600 a square meter (formerly P550) in Ortigas. Rates at BGC and in Quezon City, meanwhile, remained at the same levels from a quarter ago at P850 and P680, respectively, a square meter a month.

“Occupancy costs are set to rise steadily in Tokyo and Manila due to strong take-up levels and tight vacancies,” according to Cushman & Wakefield’s separate MarketBeat Office Snapshot report for Asia-Pacific for the first quarter of 2014.

During the first quarter, Manila had the lowest vacancy rate for grade A office space among so-called emerging markets, while rental rates were the eighth-lowest in the same category. Besides Manila, the other emerging cities for grade A space were Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune in India; Bangkok, Thailand; Chengdu, Guangzhou and Shenzhen in China; Hanoi and Ho Chi Minh in Vietnam; Jakarta, Indonesia; and Kuala Lumpur, Malaysia.