The demand for office space is expected to slow over the next few months and lease rates would likely decline following the completion of a number of new buildings in Metro Manila, according to global real estate services company Cushman & Wakefield.
“We expect [office space] supply to grow by nearly 12 percent by the end of the year, and more so in the next three years, from 2013’s inventory in Metro Manila. This should push vacancies upward and weigh down on rental growth,” Cushman & Wakefield said in its MarketBeat Office Snapshot report for Manila for the second quarter of 2014.
Despite the projected increase in vacancies, however, office leasing demand is seen slowing down, the report said. “We should see strong absorption in the market as demand remains robust, especially for grade A space. However, strong completions in the near term could bring down growth rates versus previous years.”
In the second quarter, office vacancy in Metro Manila was at 3.81 percent, up 1.2 percentage points quarter-on-quarter as well as 0.8-percentage point higher year-on-year.
At end-June, developers’ completions rose by almost 15 percent year-to-date, hence pushing up vacancy rates, Cushman & Wakefield noted.
The vacancy rate at the Ortigas central business district (CBD) was the highest during the April to June period at 8.52 percent, up from 2.49 percent in the first quarter.
In Quezon City, 4.60 percent of office space was vacant during the second quarter; at Filinvest Corporate City in Muntinlupa City, 2.23 percent; and at the Makati CBD, 2.19 percent.
Office space vacancy was lowest at the Bonifacio Global City and McKinley Hill developments in Taguig City, with a combined vacancy rate of 1.51 percent from April to June, slightly up from 1.20 percent during the first quarter.
“Robust demand to locate in Bonifacio Global City and Makati’s CBD, coupled with lease renewals, has kept the market tight in prime and grade A developments. Vacancy in grade B office buildings in Makati’s CBD increased 0.81 percentage point to 3.9 percent, as tenants flocked to higher quality developments,” Cushman & Wakefield explained.