Metro Manila office market posts high net absorption in Q4 2018
Vacancy rate kept low despite new completions, while market conditions in Ortigas improved
The Metro Manila office market saw an impressive net take-up in the fourth quarter last year amid the expanding local outsourcing and offshoring (O&O) industry.
According to global real estate services firm KMC Savills, an estimated 746,000 sq m of new gross leasable area (GLA) was introduced in the capital while net take-up surged to 701,100 sq m.
Budding districts Alabang and Bay Area had an excellent year with signs of strong growth backed by the presence of the Philippine Offshore Gaming and Outsourcing (POGO) sector. Vacancies in Alabang are becoming tighter, as it further dropped to only 1.4% of the stock. Although Bay Area’s vacancy rate marginally increased to 0.6%, net take-up exceeded the influx of new supply at 163,500 sq m. Rental rates in both districts showed hefty year-on-year (YoY) growth, with 5.30% for Alabang and 10.9%, the highest for the quarter, for the Bay Area.
Makati CBD’s vacancy rate remained solid at 3.0% despite the completion of the NEX Tower and a slower net absorption of 19,500 sq m. The premier business district has been under tight conditions since 2016, causing an upsurge in rental rates averaging to P1,104.0 per sq m/month. Additional supply from the Asian Century Center and a similarly slower net-take up drove the amount of unoccupied spaces in Bonifacio Global City (BGC) higher to 5.0%. Despite this, rents in the submarket grew at a healthy pace of 5.0% YoY, resulting in P972.8 per sq m/ month.
Market conditions in Ortigas Center improved as it saw a decrease in vacancies at 2.0% after net absorption rebounded at 51,700 sq m. Quezon City, on the other hand, experienced a spike in vacancies reaching 16.4% due to the completion of Cyberpark Tower Two and Centris Cyberpod Five.
Overall average rent in Metro Manila has accelerated further hitting 5.0% YoY at the yearend. Makati CBD commanded the highest rental rate among the submarkets and is expected to escalate as contract expirations are forecasted to drive higher bids.
“We expect mixed results in 2019 as we see the different submarkets undergo through varied conditions affecting vacancies, absorption, and rental growth. Overall Metro Manila rental rates might accelerate, specifically for the Makati, Alabang, and Ortigas Center submarkets due to rising demand despite the latter’s pipeline of 206,000 sq m GLA completions for next year,” finishes Fred Rara.