Posted on October 12, 2015 09:35:00 PM
[ BusinessWorld Online ]
By Daphne J. Magturo, Reporter
THE GROWTH in Metro Manila’s office
rental rates will be among the fastest in Asia in the next 12 months, with
Bonifacio Global City (BGC) accounting for the bulk of pent-up demand, KMC MAG
Group, Inc. said.
A VIEW of the Makati financial
district on Jan. 31, 2011. -- AFP
“Manila’s office market is witnessing
a rapid expansion at the moment... a result of the strongly performing occupier
market which is driven by the IT business process outsourcing (IT-BPO)
industry,” the property consultancy firm said in its Asian Cities Report:
Manila Office 2H 2015 dated Oct. 8.
KMC MAG said the IT-BPO sector, which
took up 430,000 square meters (sq.m.) in 2014, is expected to occupy 400,000
sq.m. this year “with no signs of slowing down.” The industry employed 1.03
million Filipinos last year and the IT and Business Process Association of the
Philippines said on Oct. 5 that it is “confident of hitting” the 1.2 million
employee target for 2015.
This prompted KMC MAG to maintain its
“bullish outlook” on Manila’s office sector, with rents and capital values
projected to grow by 5-7% over the next 12 months.
“5-7% is comparing rather well to
other markets. I believe only Tokyo and Jakarta are posting similar growth
rates while majority of other cities are between 1-2%, so it’s among the
fastest,” Antton Nordberg, Research and Consultancy Manager at KMC MAG, said in
an e-mail interview yesterday.
KMC MAG said other submarkets are
“gaining traction,” especially BGC, which will supply half of the 2 million
sq.m. new office space in the market until 2018.
“A lion’s share of the supply pipeline
will arise in BGC. In terms of growth expectations, I’m more conservative for
BGC than for overall in Manila because of the supply pressure,” Mr. Nordberg
said.
He noted a 3-5% increase in BGC’s
rents and capital values for the next 12 months.
The remainder of the new office space
will be “widely scattered” among Metro Manila’s main business districts, as a
result of the “increasing pressure on real estate to facilitate all the
businesses which the traditional CBDs cannot handle anymore.”
Because the outsourcing industry is
“price sensitive,” tenants are willing to move to secondary business districts
with cheaper occupancy costs such as Quezon City and the Manila Bay area,” KMC
MAG said.
Makati will be able to provide
additional stock through the redevelopment of the Ayala Triangle and the City
Gate complex, but this will likely be available after 2018, “forcing companies
looking for prime space to revert to BGC.”
“Despite the strong demand, the large
pipeline is expected to maintain a downward pressure on rental growth and
slightly increase vacancies, especially in 2016,” KMC MAG said.
Next year’s office supply is expected
to peak, with 630,000 sq.m. to be added to the market.
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