Rental rates for prime office space within Metro Manila’s key commercial districts increased in the third quarter amid robust demand mainly from business process outsourcing or BPO firms, according to global property consultancy firm Cushman & Wakefield.
“Manila’s average asking rents continued to rise in the third quarter of 2014, increasing by 1.6 percent to P781 per square meter per month. Makati CBD (central business district) and BGC (Bonifacio Global City) retained the highest average asking rents across all districts as office interest remained high in the aforementioned districts,” Cushman & Wakefield noted in its Marketbeat Office Snapshot for Manila for the third quarter of 2014.
The average direct asking rental rates during the second quarter stood at a lower P769 per square meter a month.
In particular, higher rates were posted at the Ortigas CBD (P640 per square meter per month from P600 in the second quarter) and Quezon City (P720 per square meter per month from P700 previously) in the third quarter.
At the Makati City CBD and its fringe areas, the average rental rates for prime and grade A office space amounted to P1,049 per square meter per month in the third quarter, unchanged from the previous quarter.
Over at BGC and McKinley Hill in Taguig City, rates remained at P895 per square meter per month, while the monthly average rent worth P600 per square meter down south at Filinvest City and Madrigal Business Park was also unchanged quarter-on-quarter.
Despite higher average rates, leasing activity across Metro Manila’s business hubs was stable during the July to September period, Cushman & Wakefield said.
“Two new office developments in the third quarter of 2014, namely, Rockwell Business Center Tower 3 in the periphery of Ortigas CBD and the office component of SM Aura in BGC, added 28,400 and 40,424 square meters, respectively, to the total Manila prime and grade A office stock. Despite the new completions, the overall average vacancy rate in the quarter was observed at 3.4 percent as stable leasing activity supported positive take-up of existing and new office buildings,” Cushman & Wakefield noted.
In the third quarter, the overall vacancy rate was at 1.1 percent in Alabang, 1.4 percent in Makati, 3.6 percent in Quezon City, 5.3 percent in Ortigas, and the highest was 5.7 percent in BGC.
As for the overall direct net absorption, about 77,301 square meters were recorded in the third quarter, of which the bulk were in Ortigas (64,250 square meters) and Makati (10,533 square meters).
“The leasing market remains largely driven by the entry and expansion of the offshoring and outsourcing (O&O) firms,” Cushman & Wakefield explained.
For instance, Cushman & Wakefield cited that US financial services firm Depository Trust & Clearing Corp. took up about 3,200 square meters at an existing Makati facility, while Maersk Global Service Centers Ltd. recently signed to lease about 8,900 square meters at a new building near the Ortigas CBD.
As the year 2014 comes to a close, Cushman & Wakefield sees supply pressure muting rental growth.
“The Manila prime and grade A office stock is projected to grow by 13.6 percent year-on-year by the end of 2014. This figure is expected to continue to rise in the next three years as developers pursue and complete new office projects. The large volume of future prime and grade A office stock should push vacancies across districts upwards and mute rental growth, overall,” it said.
“Despite the significant supply expansion, we should still see office absorption to remain stable in the near and medium term on the back of projected continued growth of the O&O sector. This is reinforced by the healthy pre-commitment levels of upcoming office buildings which should buoy rental rates moving forward,” Cushman & Wakefield added.