Ortigas turning more attractive to office tenants–KMC Savills
MANILA -Office tenants are seen flocking to Ortigas Center as rental fees are relatively cheaper in this business district that still has over 20-percent vacancy rate—which can be a threat to real estate growth in Bonifacio Global City (BGC), according to property consulting firm KMC Savills.
In its recent research note, KMC Savills said that the “demand has surged on the back of Ortigas Center’s affordability and quality stock.”
Average monthly net rental rate is about P687.20 per square-meter (sqm), much lower than BGC’s P1,051.60/sqm, the research noted.
Ortigas has an office stock of 1.12 million sqm and vacancy rate of 26.3 percent. BGC, on the other hand, has a 10.1 vacancy rate.
“We remain bullish on our outlook for Ortigas Center given its recent performance. We believe the tenant market has taken notice of the submarket’s superior options which carry a significant discount versus buildings in Makati CBD (central business district) and BGC,” the property expert said.
While the average rentals in Ortigas have been relatively stable, KMC Savills noted that the projected occupancy growth might drive the rate to P850/sqm monthly.
Meanwhile, KMC Savills said that the “rental acceleration in BGC will hit a ceiling, given conditions in Metro Manila office market have yet to improve.”
The property expert noted that the slowdown in Makati City office rental rates might also stall BGC’s growth, in addition to tenants being attracted to Ortigas. Average monthly rentals in Makati City declined by 4.1 percent to P1,035.30/sqm.
Landlords getting aggressive
“The rental deterioration in Makati CBD should further drag rental growth in BGC as the premier financial district tries to remain competitive,” it explained.
In the first quarter, the Metro Manila office market’s vacancy rate climbed to 21.5 percent with the opening of new office spaces sprawling 69,300 sqm.
The Alabang office market’s vacancy rate peaked at 35.5 percent for the period. “We expect market conditions to remain idle until the end of the year, but we do not discount any further erosion in rents as landlords compete for tenants,” the consultancy firm said.
The vacancy rate in Quezon City is expected to remain above 18 percent for the rest of the year. Bay Area, meanwhile, saw its vacancy rate at 36.6 percent in the first quarter.
“Landlords are starting to become aggressive in their pricing, and we should expect this to be the norm as occupiers race for quality amidst broader options,” KMC Savills explained.