Now a tenants’ market–CBRE

Written by Rizal Raoul Reyes / Correspondent

Wednesday, 20 May 2009 19:03

Tenants are now in a better position to get cheaper rates from landlords, thanks primarily to sharply reduced demand for office spaces due to the global financial crisis. “From a landlords’ market up until the first half of 2008, it now seems that the market has totally shifted in favor of the tenant. Landlords have been forced to reduce lease rates to address the budget and financial constraints being faced by most tenants as well as the slackening demand in the market,” according to property management consulting firm CB Richard Ellis (CBRE) Philippines in its first-quarter report for the year released to the media on Tuesday. According to CBRE Philippines, the vacancy rate for prime grade buildings in the Makati commercial business district (CBD) went up from last quarter’s 4.5 percent to 7.6 percent, the highest recorded vacancy rate since the start of 2008. CBRE Philippines said companies were forced to scale down their operations because of the economic crisis. Others have moved to buildings with lower rents within the CBD, while some opted to relocate to the other business districts. This increase in vacancy comes with a reduction in lease rates, which is now around P892 per square meter per month on average, from the previous quarter’s P1, 019 per square meter per month. As a reaction, building operators were forced to lower rents to stem the exodus of tenants and remain competitive in the market. Despite the crisis, CBRE Philippines said Fort Bonifacio remains a viable alternative district as shown by the various ongoing and planned projects, notably, a six-star hotel by Shangri-La Hotel and a new shopping mall by SM. CBRE Philippines said Bonifacio Global City has maintained a high occupancy rate of around 97 percent and lease rates have remained relatively stable at around P764 per square meter per month, which is a fraction of 1 percent higher than that of the previous quarter. “This, however, may take a turn as a number of office buildings which are set for turnover within the immediate future are still slightly taken up,” said CBRE Philippines. These include Fort Legend and Piccadilly Star, Three World Square, One Campus and Two Campus Place and McKinley Lease rates went down by as much as 12.92 percent to P562 per square meter per month from the last quarter, probably as an adjustment to keep tenants from moving out. CBRE Philippines said the Bonifacio Global City (BGC) has become popular with BPO companies and is being packaged as an alternative to the CBD as well as the BGC, which typically has higher lease rates. Furthermore, CBRE Philippines said the need for housing from the low-to middle-end market remains a bright spot in property market as shown by projects of experienced developers “It proves that the real-estate segment is still positive despite the gloomy global situation,” CBRE Philippines.