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Global real estate advisor Cushman & Wakefield expressed optimism about the long term potential growth of the office property market in Metro Manila, on the back of a strong local economy.
“The immediate effect of the recent presidential elections and the United Kingdom’s exit from the European Union on the property market remain unclear. However, there is reason to be optimistic for the long-term potential growth of the Manila office market,” Cushman & Wakefield said in its latest MarketBeat Office Snapshot Q2 report.
“Preleasing demand, driven by the business process outsourcing (BPO) industry and new corporate occupiers, continues to absorb space from upcoming building completions. Rental rates are expected to rise at a steady pace in the next 12 months as well,” the report stated.
This optimism is anchored on the robust local economy which expanded by 6.9 percent in the first quarter of 2016, making the country one of the best performers in the region.
The report pointed out that the services sector led the growth of the economy, accelerating to 7.9 percent from 5.5 percent year-on-year while household consumption accelerated to 7 percent from 6.1 percent.
Rising supply
Data from Cushman & Wakefield showed that in the second quarter this year, the supply of Prime and Grade A office space in Metro Manila increased to almost 5 million square meters (sqm) in the second quarter of 2016 from the 4.9 million sqm reported a year ago.
Building completions during the quarter, it said, included the BGC Corporate Center in Bonifacio Global City (BGC) in Taguig City, and ATC Corporate Center and Polaris in Muntinlupa City.
Average vacancy rate meanwhile fell by 1.6 percent as increased pre-leasing activity took up much of the new space from the recently completed developments. Absorption was estimated at 99,534 sqm for the quarter, the report stated.
“Demand continues to be boosted by BPO firms. Some of the recent significant leasing transactions include a human resource outsourcing firm and a publishing house leasing one floor (2,400 sqm) each at Araneta Cyberpark Tower 1 in Quezon City,” it further said.
“Average asking rental rate increased by just 3.1 percent year-on-year, from P750 per square meter per month last year to P772/sqm/mo this year. Over the first half of the year, rental growth has been stable, though slightly slower than in previous periods where growth was at 4-5 percent year-on-year,” the consultancy firm added.