Office space demand seen to buoy property sector

THE PHILIPPINE office property sector is expected to remain one of the bright spots in the local real estate industry, bolstered largely by credit ratings upgrades, a sound business climate, and the steady growth of outsourcing and offshoring activities in the country.

“The office sector continues to perform well in Asia Pacific as [the Philippines] is one of the most cost-effective outsourcing destinations in the region. As the outsourcing and offshoring sector gains strength in the country, we see more occupiers and developers prioritizing flight to quality,” CBRE Philippines founder, chair and CEO Rick M. Santos said in a report.

“The Philippines continues to be an attractive outsourcing destination as a result of the robust demand for office space. Developer-driven central business districts in Clark, Cebu, Davao and Iloilo create new demand for better location and appropriated zoned office districts,” Santos added.

According to CBRE Philippines, new office spaces in Metro Manila are mostly taken up by business process outsourcing (BPO) locators. The aggregate office occupancy rate for the five business districts namely Makati, Fort Bonifacio, Alabang, Quezon City, and Ortigas is pegged at 97.1 percent for the second quarter of the year. Total net absorption in these five CBDs amounted to 40,935 square meters for the same period.

Vacancy rates meanwhile dropped to 2.9 percent in the second quarter from the 3.28 percent in the first quarter of 2015 due to the growing take up of available office spaces. Prime buildings in Makati and grade A buildings in Fort Bonifacio were reported to have enjoyed the strongest demand.

“As the country’s macroeconomic fundamentals remain stable, pre-leasing of space in new office buildings slated for completion in the next two to three years remains high. Total new supply of office buildings in Metro Manila in 2015 is 682,835 sqm and 901,004 sqm in 2016. Fort Bonifacio has the biggest supply of upcoming offices which sums up to almost 1.3 million sqm until 2018,” CBRE said.

CBRE added that it expects the increase in supply in the coming quarters to be accompanied by marginal increases in headline lease rates. The strong demand for office space coming from top multinational companies and IT-BPO firms is expected to continue.

“The local office market continues to be healthy and positive net absorption is expected to remain as more companies transfer to the Philippines to capitalize on Filipino talent and make their operations cost effective. The completion of the Asean economic union will further support the growth of the office market,” CBRE further said.

Meanwhile, CBRE also remained bullish of the real estate market’s prospects in the retail sector given the country’s robust household consumption, and in the residential segment, as demand remained stable while condominiums continued to enjoy high take up rates.

“Bright prospect for the Philippine residential market is anticipated in the coming quarters. This bullish interest is expected to continue despite the weakened global performance, especially that of Greece and China. The country’s sound macroeconomic fundamentals and policies will enable the Philippines to withstand these shocks,” the CBRE report said.

Further, CBRE also pointed out that the “gaming industry is currently the sunshine market in Philippine real estate, with the strong demand and supply coming online in the coming years.”

The Entertainment City, in which some $15 billion is expected to be invested in by private companies, is seen to “catapulting the Philippines into the global market,” CBRE said.