Rental rates for prime office space in Metro Manila trekked higher in the second quarter of the year, driven mainly by demand from business process outsourcing firms, according to a report of CBRE Philippines.
The property consulting firm said demand from “traditional” offices also helped boost the market and pushed prices of “Grade A” space up during the period.
“We believe this is just the start of the projected up-cycle for the Philippine property market as determined by real demand and strong macroeconomic fundamentals,” CBRE Philippines chairman and CEO Rick Santos said in a statement.
In the central business districts of Makati and Ortigas where traditional office buildings are concentrated, the rising demand from multinational and local companies is supporting the increase in rental levels, the company said.
Average office rent in Makati rose by 2.65 percent quarter on quarter to P809 per square meter/month, while Ortigas rental rates rose quarter on quarter to P554 per sqm/month.
According to CBRE, the rise in office rental rates has been more apparent in the BPO-dominant business districts of Alabang in Muntinlupa City and in Quezon City.
Average office rent in Alabang grew by 6.1 percent from the previous quarter to P501 per sqm/month. That in Quezon City rose by 3.1 percent to P516 per sqm/month.
Demand pressures also pushed rates higher in the Fort Bonifacio area—Bonifacio Global City and the McKinley Hill districts, with average rental rates now at P698 per sqm/month.
Surprisingly, virtually no tenants gave up their office space during the period despite the uptrend in rent rates. CBRE said that despite the higher rent, vacancy rates across the major business districts were kept below the 5-percent level.
“Office vacancy rates declined even with the growth in rental levels because of supply pressures,” Santos said, adding that so-called “pre-commitments” (where terms are set long before the actual space becomes available for use) were also active for offices that are still in the pipeline.
The sharpest decline in vacancy rates was recorded in the Fort Bonifacio district, which is now at 1.48 percent. Vacancy rate in Alabang stood at 3.08 percent in the second quarter and 2.79 percent in Quezon City.
In Ortigas, vacancy rate stood at 2.96 percent, while in Makati—which has the priciest rental rates in the country—recorded the highest vacancy rate at 4.6 percent.
Going forward, CBRE said the entire Asia-Pacific region will likely see business confidence remain “largely positive,” with companies continuing to hire new staff.
“However, the outlook for the regional economy continues to be overshadowed by the deteriorating economic situation in the United States and the Eurozone,” the property consulting firm warned.
“While economists expect [the] Asia-Pacific to record more rapid economic growth in 2012, this will be largely dependent on the revival of activity in regional laggards such as Japan and New Zealand. Major export-oriented and resources-led economies may be more vulnerable to the future weakening of global demand, should such a scenario occur.”