The Metro Manila office market is experiencing a steady rise in lease rates as vacancy rates continue to fall to single-digit levels as of the second quarter of 2011 based on the recent findings by leading real-estate advisory firm CB Richard Ellis Philippines (CBRE).In a recent press conference held at the Peninsula Manila in Makati City, CBRE CEO and chairman Rick Santos discussed growth on the different sectors of the Philippine economy, with the real-estate sector being a major contributor to the country’s economic growth. “The real-estate sector continues to be showing positive output during the first half of President Aquino’s administration. CBRE has been monitoring record investments pouring in Asia like in China and Singapore. The Philippines’ real-estate sector, on the other hand, has had huge demand. This can be seen in various developments by real-estate companies not only in the major business districts here in Manila but in key cities as well,” said Santos.
While much of the gains were made by the manufacturing sector, with the country’s GDP increasing by 4.9 percent in the first quarter, this growth was supported by real estate, renting and related business activities.
The Philippine business-process outsourcing (BPO) industry continues to expand. This expansion is seen to translate to the need to build close to three million square meters of office space. A need that is expected to drive further growth in the real-estate sector.
Vacancy rates are falling while lease rates continue to improve in all major business districts on the back of strong corporate expansionary demand coupled with a tight market supply. Office absorption was active in the first half with higher tenant requirements for both BPO and traditional offices. In Makati CBD, vacancy rate decreased to 4.64 percent during the second quarter of 2011 from 5.3 percent in the previous quarter. Vacancy has likewise decreased in Fort Bonifacio from 5.34 to 1.48 percent. In Ortigas, vacancy in the second quarter went down from 3.04 to 2.96 percent. Vacancy rates in Quezon City and Alabang have also declined to 2.79 and 3.08 percent, respectively.
Lease rates of the business districts have consistently been on the uptrend. The sustained demand for office space from expanding BPO companies has further pushed the rental rates up in the commercial areas of Taguig, Alabang and Quezon City. In Fort Bonifacio, lease rates increased by 1 percent from P691 per sq m in the previous quarter to P698 per sq m in the second quarter. Alabang posted a 6.1-percent increase in lease rates during the second quarter with rates now at P521 per sq m to P491 per sq m, while lease rates in Quezon City also went up by 3.1 percent from P501 per sq m in the first quarter to P516 per sq m. Meanwhile, lease rates in Makati CBD regained momentum as rents continue to go up by 2.65 percent in the second quarter amid the increasing demand by both multinational and local companies. Lease rates in the Makati CBD are now at P809 per sq m, up from P780 per sq m in the previous quarter, while lease rates in Ortigas posted an increase in the second quarter from P550 per sq m to P554 per sq m.
Leased commercial spaces across Metro Manila remain strong as ready-for-occupancy supply are taken up with few small office spaces left. Across these business districts, vacancy in the second quarter was below 5 percent. Prime office buildings in Makati registered a 2.63-percent vacancy rate, pulling down the vacancy rate in the CBD to 4.64 from 5.3 percent during the first quarter.
Santos said that the administration of President Aquino is doing a great job of implementing economic policies and, in fact, he sees a continued upbeat movement within the next four to five years. “We believe the Philippine office sector has some of the best fundamentals of all the Southeast Asian markets. While lease rates are on the rise, our office rental rates remain one of the cheapest in Asia. This high demand in office space despite the limited supply is a positive indication that Metro Manila and the Philippines in general remains one of the favored business destinations, particularly by the BPO sector destinations in Asia,” Santos shared.
In Photo: CBRE CEO and chairman Richard Santos. (Photo by Don Clavo de Comer)
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