The Philippine office property market may see a continued rise in rental rates over the short term despite the growing demand from outsourcing and offshoring companies.
This was based on the latest Asia Pacific Property Digest of JLL, a global professional services and investment management firm.
According to the report, 10 office developments are expected to add 348,000 sqm to total stock in the next two quarters. This will likely push rent growth rates down as the large incoming supply comes on stream, the JLL report added.
However, the market is expected to likely “remain tilted in favor of landlords with rents expected to continue to increase amid ongoing demand from the outsourcing and offshoring sector and a low vacancy environment. Many upcoming projects in Makati central business district (CBD) and Bonifacio Global City (BGC) have high pre-commitments,” it further said.
Based on JLL’s latest report, leasing activity remained robust in the third quarter, pushing rents to rise by 2 percent to P965 per sqm per month, compared to the previous quarter. Capital values posted an increase of 2.2 percent quarter on quarter to P126,115 per sqm from the July to September period, up from the P123,400 per sqm in the previous quarter.
“The Philippines remains a popular FDI destination in the region, on the back of firm economic fundamentals and robust domestic consumption,” the report stated.
The JLL property digest further reported that the net absorption in the Makati CBD and Bonifacio Global City remained high in the third quarter at 43,000 sqm.
However, the net take-up slid from the 59,800 sqm recorded in the second quarter due to increased occupancy levels in the existing and newly completed developments.
“Key lease transactions during the third quarter of 2016 included a 1,583-sqm office space leased by an offshoring and outsourcing firm in Tower 6789 in Makati CBD; a 1,085 sqm office space leased by a tech firm in Net Park in BGC; a 2,240 sqm office space leased by an advertising firm in 8 Rockwell in Makati CBD; and a 2,501-sqm office space leased in BGC Corporate Center,” the JLL digest stated.
Vacancy rates meanwhile declined as supply tightened. This, according to JLL, was due to the fact that no new office development was completed in Makati CBD and BGC in the third quarter.
Developments slated for completion for the said period faced delays. The office developments that are expected to be completed in the last quarter of 2016 included the Inoza Tower, Ore Central, Vista Hub and W City, all of which are located within the BGC.
“The vacancy rate dropped to 2.2 percent in the third quarter of 2016 from 3.7 percent in the second quarter of 2016, due to high take- up among existing and newly completed office developments sustained by the expansion of the outsourcing and offshoring sector, along with demand from the tech and financial industries. The lack of new stock during the quarter also contributed to the decrease in vacancy,” the report stated.