Revival in demand for office space on the uptick

Written by Dennis D. Estopace / Reporter

Saturday, 08 May 2010 19:05

The revival in demand for office space in the region in the first quarter of the year is being reflected in the local uptick, defying even worries of political instability. “Yes, it’s an internal momentum of the market,” Colliers International (Phils.) Inc. research manager Ramon Jose Aguirre said. The BusinessMirror spoke to Aguirre after the company released a statement, citing that “a general stronger-than-expected pace of economic recovery in Asia-Pacific has led to a noticeable revival in demand for office space” in the first three months of the year. “The markets were marked by increasingly positive sentiments resulting from the relaxed monetary measures adopted by various central governments, the ease of credit, and the sustained low interest rates,” the FirstService Corp. subsidiary said in a statement. It quoted Colliers International Asia-Pacific region executive George McKay as saying this environment encourage many investors. “A number of multinational corporations have been encouraged by the stronger-than-expected economic conditions to reactivate their real-estate plans, which had been largely put on hold right after the financial crisis hit,” said McKay, managing director of corporate services. Aguirre concurred, saying that based on their experience, they already had 60 open inquiries on office space from locators. “Before it was just 10. The new inquiries came from very few newcomers. Transactions, definitely, picked up in the first quarter,” Aguirre said. He noted that the pickup in interest on office space is being driven by the business-process outsourcing industry. “Apparently, the interest is high despite the external challenges, like the impact of the kinks as the US climbs out of recession and the upcoming national elections,” he added. Aguirre said a decade ago, political instability was a factor in decisions of locators to establish operations in the Philippines. “It appears they have become used to doing business in such situation.” Nonetheless, Aguirre said he “wouldn’t discount the effect of the crisis last year, since a lot held off on their investments and there was a lot of supply as developers overbuilt.” Still, there’s a chunk of supply in the Makati Commercial and Business District (CBD), he said, that may have tempered its rental-rate levels. However, Aguirre said outside of the Makati CBD, there’s a noticeable increase in office rentals at an average of 5 percent. “Last year, too, some of the developers offered concessions. But, right now, they’re withdrawing the incentives. They can charge x amount of rent compared with last year. Tables have turned,” he said. The increase in office rent is seen, as Aguirre cited the Fort Bonifacio Global City’s Mckinley area as example. Meanwhile, he said developers continue with their expansion, citing the SM Group’s construction of a second building at the Mall of Asia, which is mainly for BPO operations. Colliers International said, “Overall, the leasing market in the region revived somewhat, with rentals edging up by 0.9-percent quarter-on-quarter in [Q1 2010]—the first-quarterly increase registered in the past one-and-a-half years.” It added that “on the salesfront, investment demand for office properties remained strong, notwithstanding the continued compression of investment yields” in the first quarter. “Local private investors continued to be one of the key groups of players,” Colliers said. The real-estate broker cited Hong Kong and China as examples of the market improvement at the regional level. “Looking ahead, the demand for office real estate in the region continues to gather strength on the back of further economic growth expected over the next few years,” the company quoted McKay as saying.