Office property market in PH seen to sustain growth

The Philippines remains a hot site for office property investors given strong demand especially from business process outsourcing (BPO) firms and higher yields compared to regional markets, property experts from international property consulting firm Jones Lang Lasalle said Tuesday.

Low rental rates relative to other cities in the region and the relatively low capital values are also seen to suggest more upside potential.

“There still is very strong demand coming from the market,” JLL regional director Lizanne Tan said in a  briefing, noting that 56 percent of supply this year was already leased out.

“Market remains favorable to landlords, and tenants continue to consider pre-committing to space to mitigate higher real estate cost,” Tan said.

As such, JLL noted that rents in various areas of the metropolis continued to escalate year-on-year.  In the last 12 months, rental rates have risen by 4 to 10 percent across Metro Manila while vacancy rate had averaged a modest 4 percent across all business districts in the National Capital Region.

JLL estimated that about 721,100 square meters (sqms) of office property space is available this year.  Next year, additional supply is seen to reach 1.2 million sqms, of which 23 percent had already been committed for lease.

For 2018, about 793,000 sqms of additional office supply were seen to be delivered, of which 16 percent had been pre-committed to date.

JLL estimated that the current average monthly rental rate for prime office space in Makati central business district (CBD) ranged between P1,200 to P1,500, rising by 12 percent year-on-year.  Grade A offices in Makati CBD currently fetch P950 to P1,200/sqm per month, up by 10 percent year-on-year.

Rental rates have likewise risen in BGC’s Grade A offices to levels already approximating rates in Makati at P850 to P1,300/sqm per month, up by 10 percent year-on-year.

A number of corporations still want to set up shop in Makati while BGC is also attractive because of the lower tax rates in Taguig, Tan said.

In Ortigas, rental rates have gone up by 10 percent year-on-year to P600-P750/sqm per month while rental rates in Bay City (Mall of Asia area) have also risen by 10 percent to P500-P700/sqm.

On the other hand, monthly rental rates in Quezon City (P550-P850/sqm) and Alabang (P500-P600/sqm) have stabilized, Tan said.

Tan noted that Quezon City was catching up, being the most populated city in Metro Manila (2.76 million people), which also creates a higher talent pool for companies alongside relatively larger space available in the area.  Other plus points include lower rental rates.

Meanwhile, she said Alabang was starting to generate interest from the office property market.  This area is gateway to Southern Luzon and offer competitive rates and supporting infrastructure.  However, office workers incur additional travel costs due to tollways.

Overall, Tan said the future for the Philippine office property market was still strong because rental rates still low compared to neighboring countries. It is also the fourth lowest in terms of capital values to date. Doris Dumlao-Abadilla