November 5, 2019 | 12:04 am [ bworldonline.com ]
Makati City and Taguig City continue to have the most expensive office rents in the country. -- CATHY ROSE A. GARCIA
By Bjorn Biel M. Beltran
Special Features Writer
TRADITIONAL businesses have overtaken the Philippine offshore gaming operators (POGOs) and IT-business process management (IT-BPM) companies in terms of office space demand in the third quarter.
In its Q3 Metro Manila Office Market Overview and Full Year Outlook, Pronove Tai International Property Consultants tracked a total of about 305,000 square meters (sq.m.) of pre-leasing and leasing transactions from July to September 2019.
Traditional offices accounted for 40% or 122,000 sq.m. of total transactions, followed by IT-BPM sector at 32% or 96,000 sq.m., POGOs at 23% or 71,000 sq.m., and flexible workspaces at 5%, or 16,000 sq.m.
“The third quarter proved to be an exceptionally strong period for the traditional firms with a significant 61% growth YoY (year-on-year) from only 76,000 sq.m. last year” Monique Cornelio Pronove, president and CEO of the property consultancy firm, said.
Of the traditional businesses driving demand, banking and financial firms accounted for the largest share at 20% of transactions; food and beverage firms followed at 15%, while insurance firms, government offices and NGOs, and real estate companies accounted for 14%, 8%, and 7% respectively.
POGOs demand, which took up the lion’s share of leasing transactions last quarter and accounts for about 386,000 sq.m. of total office space take-up in Metro Manila as of September, was dented by an announcement by the Philippine Amusement and Gaming Corporation in August that it will no longer grant licensing permits to new POGO applicants until the end of the year.
Expansion of IT-BPM companies, meanwhile, has been limited by the government moratorium on new economic zones in Metro Manila as part of a decentralization plan to push stronger economic activity in suburban areas. IT-BPM companies prefer to locate in office buildings that have been declared as ecozones to take advantage of tax perks and other incentives.
“Amidst these challenges, the office leasing market remained strong and we project it to reach 1.2 million sq.m. by the end of December 2019. This would breach last year’s record performance by 9%,” Pronove said.
“Makati, the country’s premier business district, accounted for the most leasing transactions at 28%. The Bay Area accounted for 20%, characterized mostly by POGOs and then Quezon City at 17% with IT-BPM accounting for most of the leasing transactions there this quarter,” Pronove added.
From July to September, 15 new buildings were completed adding 402,000 sq.m. to Metro Manila’s office stock, bringing office stock to 11.4 million sq.m. Much of the new supply (82%) was located in Quezon City and Taguig City, adding approximately 230,000 sq.m. and 101,000 sq.m., respectively.
Despite this, vacancy levels dipped to 5% from 6% in the previous quarter. Due to robust demand, Pronove Tai expects vacancy to dip further to around 4-5% by the end of this year.
Districts with the lowest vacancy rates are in the Bay Area (Pasay and Parañaque) as well as Makati City at a staggering 0.4% and 2%, respectively. Only three districts‚ Ortigas Center, Muntinlupa City and Taguig City registered a vacancy of 5-6% this quarter.
“This has been Quezon City’s highest recorded supply in a quarter. We saw a 10% growth year-on-year in Quezon City coming from nine buildings. This alone accounted for 57% of the new supply in Metro Manila this quarter,” Ms. Pronove said.
“Though the office vacancy decreased from 12% in Q2 to 11% in Q3, Quezon City still had the highest vacancy in Metro Manila at over roughly 150,000 sq.m. This could be attributed to the slow leasing absorption for its new building completions in the past two years as it only recently opened its market to POGO occupiers.”
Makati and Taguig recorded the top rents in the city, with Makati still at a 21% premium over Taguig rents. Additionally, both business districts have recorded the highest rental growth over the year.
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