Office space take-up maintains upward curve in Q1 this year

The latest data from CBRE Philippines and Jones Lang LaSalle Philippines has shown that the real estate market has maintained its growth in the year that the Asean Economic Community (AEC) is expected to commence.

CBRE Philippines, which held its first quarter 2015 update on May 27, revealed that with revenues growing to 18.7 percent from the previous year, the business process outsourcing sector continues to drive the Philippine office market, resulting in strong office space take-up. It cited that “the active office market is expected to maintain its upward trajectory, with developers slated to introduce 780,000 square meters of office space in the next quarters.”

The Makati central business district was especially mentioned, as its lease rates grew by a quarterly increase of 0.81 percent, while overall vacancy rating hiked by 4.73 percentage points to 5.05 percent.

“Scant supply is expected to fuel the rental rates in the coming quarters, and vacancies are seen to contract with the completion of new office buildings by 2017. Fort Bonifacio absorbed more than 5,000 sqm of office space during the quarter. Vacancy rates dropped from 3.97 to 3.34 percent quarter-on-quarter. Demand for office space in Ortigas CBD increased as BPOs expanded here. Activities in other business districts, including Alabang, Eastwood City and the upcoming Bay City, remain slow but steady as well.”

The May 2015 JLL report, sent by   research, consulting and valuation head Claro dG. Cordero Jr. to Inquirer Property, highlights key trends in the real estate market during the past month, with a focus on the office, residential, retail and hotel property markets.

Focus of the report

The report focuses on the following developments in the office sector:

• Convergys, one of the largest offshoring and outsourcing (O&O) companies in the Philippines, has announced plans to increase operations in Clark, Pampanga. It is recruiting more employees in line with the relocation and expansion of its operations from Clark Field to SM Pampanga within May. The expansion is the company’s first this year, following the opening of three new sites and its acquisition of Stream Global Services last year.

• SM Prime Holdings Inc. (SMPH) is set to develop six E-com centers within its 67-hectare Mall of Asia complex. Two of the office developments—One E-com Center and Two E-com Center—are already operational, while Five E-com is targeted to open by the second quarter of 2015. SMPH is keen on increasing its office space built-to-suit for O&O operations, on the back of the O&O industry’s sustained revenue growth of around 19 percent, to reach approximately $18.4 billion in 2014. Meanwhile, Three E-com is scheduled for completion in 2017, while the start of construction of Four E-com is set for 2019.

• India-based Tech Mahindra Ltd. recently launched its second O&O center in the Cebu IT Park, making it the fourth O&O center of the company in the Philippines. The newest addition is set to add 500 seats, increasing its total workforce within its four O&O sites to about 3,000 employees. Further, the forecast total workforce in the country is reported to account for 14 percent of the company’s global workforce.

• Three office towers are expected to rise within Park Triangle, a mixed-use development by Alveo Land located in Bonifacio Global City. Park Triangle Corporate Plaza, one of the office towers, sold 61 percent of its units during its launch in August 2014. The construction of the second office tower Park Triangle Corporate Center is scheduled to start in the third quarter of 2017 and expected for completion in the second quarter of 2018.