In 2018, the office sector recorded the highest take-up in the country’s history at 1.1 million square meters. Supply and demand, however, have not been balanced in Metro Manila.
The Philippine real estate industry booked a strong performance in 2018, and the office sector was no exception with a 22 percent increase in actual transactions from 875,000 square meters to 1.1 million square meters – the highest recorded take-up in the country’s history.
“I always say that the biggest beneficiary of a good economy is the property market. In 2018, while the country’s gross domestic product growth of 6.4 percent was below the forecast of 6.7 percent as at Q3 2018, the Philippines was still the third fastest-growing economy in Asia,” said Monique Pronove, the CEO of Pronove Tai International Property Consultants, at a media briefing.
Pronove said that information technology and business process management still generates the most demand for office space, with 490,000 square meters of the total leasing transactions, equivalent to 46 percent. The figure represents a 30 percent increase from 378,000 square meters last year.
In second place, meanwhile, were traditional offices, with 312,000 square meters of the total leasing transactions, up 67 percent from last year.
Philippine offshore gaming operators were at third place at 229,000 square meters, which declined compared to last year due to the lack of spaces in the preferred locations of these companies.
In fourth place were flexible workspaces with 37,000 square meters, nearly quadrupling from only 10,000 square meters in 2017. Among the top four demand drivers in the real estate office sector, flexible workspaces jumped the highest.
Office Space: Supply Vs Demand
Continued construction activities resulted in 32 new buildings last year, offering a total office supply of 845,000 square meters and growing the stock by 9 percent compared to 2017.
As of the end of 2018, the office market in Metro Manila has a total stock of 10.6 million square meters, with Makati maintaining its claim as the largest office district with a 32 percent share of 3.4 million square meters.
Following Makati is Taguig at 21 percent and Ortigas Center at 16 percent. Pronove, meanwhile, noted that Taguig delivered the highest supply over the past four years, adding an average of 280,000 square meters per year.
However, as total office supply increases, so does demand for such spaces. The vacancy level of office spaces in Metro Manila was described as “overall unhealthy” at 4 percent. Muntinlupa only recorded 3 percent vacancy while Makati and Ortigas Center were worse at only 1 percent. At the bottom of the list, however, was the Bay Area, with a very tight vacancy of 0.4 percent due to the massive demand from the POGO sector.
The Bay Area, however, was tagged as the best performer, as the only business district with a rental growth in the double digits at 19 percent.
On the other end of the spectrum, and still at unhealthy levels, were Quezon City with a very high vacancy of 13 percent, followed by Mandaluyong at 10 percent. Pronove noted that Quezon City is expected to deliver the highest supply of 343,000 square meters of new office buildings in 2019, from developers such as SM, Ayala, Eton, and Araneta Group. The rents and capital values in the city will be further pressured, Pronove said.
A healthy vacancy level is from 5 percent to 7 percent, and out of the seven office districts, only Taguig fell within this description at 7 percent.
“Taguig City is certainly inching its way closer to Makati as it continues to build more,” Pronove said.
Source: Businessmirror
