Office rental rates in MM still rising
Office rental rates in most of Metro Manila remain on the uptrend especially in the main central business districts (CBDs) amid strong demand from the outsourcing and offshoring as well as the online gaming sector, property consulting firm KMC Savills said.
In its fourth quarter property research, KMC Savills said there were 746,900 square meters of new Grade A office space completed in Metro Manila last year, roughly the same as in 2017.
“Net absorption was higher last year at 701,100 sqm compared to 615,200 sqm in 2017. Overall vacancies were kept at just 4.8 percent of stock and [ratio] is slightly higher than the 4.5 percent vacancy rate in the previous year,” the report said.
KMC Savills said rents in the capital had accelerated further, rising by 5 percent year-on-year in the fourth quarter.
“The tight conditions coupled with contract expirations have propped higher bids in Makati CBD while subsequently pushing up rents in the premier district. In addition, rents in BGC are still on the uptrend as the strong outsourcing and offshoring demand raised rentals further during the quarter,” it said.
But one outlier is Quezon City, which received more than half of new supply in the fourth quarter that raised its vacancy rate to a 10-year high of 16.4 percent. Occupier demand remained sluggish in this city, dragging Metro Manila’s performance during the quarter, and this might pull the office market further in the coming quarters, the report said.
KMC Savills said Quezon City had been a key outlier since 2016, failing to follow other submarkets such as the Bay Area and Alabang which had reversed its course since then. Office rents in Quezon City declined by another 0.2 percent quarter-on-quarter in the last quarter of 2018, ending with an average rate of P747.4/sqm monthly.
The report said vacancy rate in Makati CBD remained tight at 3 percent notwithstanding the completion of NEX Tower and a slower net absorption of 19,500 sqm compared to last quarter. The premier business district had very tight conditions since 2016, resulting in a rental growth of 5.4 percent year-on-year in fourth quarter 2018, bringing average rent to P1,104/sqm per month.
“For 2019, we expect further contraction in vacancies given the limited supply in the district’s pipeline. As a result, rents are still expected to further escalate,” the research said.
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