Office vacancy rates in Metro Manila still elevated in Q3

Vacancy rates in Metro Manila’s premium office space market continued to hover in the double digits in the third quarter of this year, as landlords stuck to high rates that left “large gaps” between bids and asking rents.

Property consulting firm KMC Savills said the average vacancy rate in the grade A office market in the urban metropolis was at 20.1 percent, the seventh consecutive quarter that it has been in the double digits.

“We saw vacancies did not budge for most submarkets. Our view is that landlords have yet to give in to market pressure and offer below-average market rents,” KMC senior research manager Fredrick Rara told the Inquirer.

Vacancy rates were at 19.9 percent and 20.6 percent during the first and second quarter of the year, respectively.

In 2021, it was at 10.7 percent in the first quarter, 13 percent in the second quarter, 15.6 percent in the third quarter, and 18.2 percent in the fourth quarter as more supply entered the market and landlords kept rates high.

“We think there should be some urgency given that demand from the IT-BPO industry is no longer the same pre-pandemic. And as central banks continue raising interest rates, we believe landlords are not in a position to hold onto their previous asking rents,” Rara added.

KMC Savills’ third quarter report shows that average net monthly rental rates in Makati City, Metro Manila’s premier financial district, was at P1,056.2 per square meter, the highest among six submarkets in Metro Manila.

On the other hand, net rental rates at the Bonifacio Global City were at P1,022.4 per square meter, P680.7 per square meter at the Ortigas Center, P642.7 per square meter in Alabang, P716.1 per square meter in Quezon City, and P814.2 per square meter at the Bay Area.