While demand for office space in Metro Manila remains high, real estate advisory firm CB Richard Ellis Philippines has warned landlords against hiking rental rates too much because this can negatively impact the country’s competitiveness as an investment destination.
CBRE Philippines associate director John Corpus said the market for office space would still expand as business process outsourcing companies continued to flock to the country.
Although higher take-up also drove lease rates up, he said, landlords should temper these increases.
“The market is still on the BPO side. It’s a huge driver for office space. We’re telling landlords not to increase rentals because there’s a certain tolerance level on rentals for BPO companies for them to lease. There’s still room to move rental rates up, but not so much,” he said.
According to a recent CBRE study comparing 15 central business districts, Manila has the second-lowest lease rate for office space at $19.10 per square foot per year. Only Jakarta, with a lease rate of $16.30, trumped Manila in this regard. Apart from Manila and Jakarta, those surveyed included Bangkok, Beijing, Guangzhou, Hanoi, Ho Chi Minh, Hong Kong, Kuala Lumpur, Mumbai, Seoul, Shanghai, Singapore, Taipei and Tokyo.
In terms of office rental yield, the Philippines ranked second in the third quarter at 10 percent, just below India’s 11 percent.
“The Philippines is one of the most cost-effective real estate markets in Asia. It is significantly less expensive than Hong Kong and Singapore, which is around 12 times more expensive. This is also why demand in the office services sector, in terms of BPO and [knowledge process outsourcing] expansion, has been growing in the country,” CBRE Philippines chairman Rick Santos said.
Metro Manila currently has 3.6 million square meters of leasable area, more than a quarter of which, or 1 million square meters, can be found in Makati. Quezon City has 784,308 square meters of leasable space, while Taguig City, mostly within the Bonifacio Global City development, has 499,464 square meters.
“This year’s projected take-up of office space in Manila is anywhere between 330,000 and 360,000 square meters, which is quite large when compared to Singapore’s 150,000 square meters a year,” Santos said. “We see continued expansionary demand from multinational companies as there is good value in the Philippine real estate market.”