By ALBERT CASTRO
[ Malaya.com.ph ] November 24, 2008
Property prices in Metro Manila will go down within the next 12 months according to real estate consultant Colliers International.
The firm’s Q3 Property Market Overview report said that leases for office and residential spaces have been tapering off in the past months.
Property values have started to correct specially in office spaces due to plenty of supply in alternative locations.
Land values in the traditional business districts appear to have peaked during the third quarter at an average of P297,300 per square meter in the Makati CBD (central business district) and P132, 990 per square meter in Ortigas Center. While land values in Makati CBD have increased by 3 percent year to day, growth has tapered off.
There is no additional office space completed in the Makati CBD during third quarter and only 7,059 square meters in Glorietta will be completed before the end of 2008 with no further completions anticipated in Makati in 2009. CBD-wide office stock is currently 2.65 million square meters.
End September vacancy in the Makati CBD stood at 2.4 percent, a marginal fall over the prior period. At this level, tenants still face limited choice but there are clear signals that the strong landlord’s market of the past two years is changing, Colliers said.
During the third quarter vacancy in Premium and Grade A buildings eased as tenants relocated to lower cost locations and/or buildings. The trend will accelerate over the next 6 months with significant relocations planned from Makati’s best buildings.
Despite economic uncertainty, demand from both new entrants and expansions in the BPO meanwhile appear to be holding up. However, while several market commentators suggest that offshoring and out-sourcing will only be strengthened as corporate profits come under pressure in developed economies facing recession, it is anticipated that decision making will slow and already some expansions planned for Q4 have been deferred until the first half of 2009.
Office vacancy in Makati CBD stood at 2.4 percent, down from the revised 2.8 percent vacancy recorded last quarter despite availability in Grade A and Premium building ticking upwards. Office vacancy should remain around 3 percent to 4 percent at the end of the year, Colliers said.
Rentals in office space peaked in Q2 2008 and on average have declined by around 4 percent over the third quarter, led by the Premium Grade buildings, according to Colliers.
"This cyclical correction was anticipated as clearly the 25 percent-30 percent growth experienced in 2006 and 2007 was unsustainable given the volume of new supply coming into the Metro Manila market. The challenge for Makati is particularly acute as tenants (particularly BPO occupiers) lured during 2002 – 2004 by low rents and a lack of alternatives at that time now face substantial rental increases at a time when new accommodation options are available in secondary and suburban locations.
