Makati, Philippines, October 23, 2019 --(PR.com
)-- “Despite headwinds faced by the ITBPM and POGO occupiers, the office market showed strong demand and is on track to another record-setting year,” Pronove Tai International Property Consultants’ President and CEO, Monique Pronove said at their Q3 Metro Manila Office Market Overview and Full Year Outlook Media Briefing recently.
In June, Administrative Order 18 by the Office of the President imposed a moratorium on the issuance of Philippine Economic Zones Authority (PEZA) accreditations in Metro Manila. This was part of the government’s decentralization plan to push stronger economic activity in suburban areas. In August, Philippine Amusement and Gaming Corporation (PAGCOR) announced that it will no longer grant licensing permits to new POGO applicants until the end of the year. “Amidst these challenges, the office leasing market remained strong and we project it to reach 1.2 million sqm by the end of December 2019. This would breach last year’s record performance by 9%.”
During the months of July-September, 15 new buildings were completed adding 402,000 sqm to Metro Manila’s office stock. This brought the “All Grade” office stock to 11.4 million sqm. The two districts of Quezon City and Taguig City accounted for 82% of the total supply for the quarter, adding approximately 230,000 sqm and 101,000 sqm, respectively.
“This has been Quezon City’s highest recorded supply in a quarter. We saw a 10% growth YoY in Quezon City coming from 9 buildings. This alone accounted for 57% of the new supply in Metro Manila this quarter,” Pronove said.
“Makati, Muntinlupa and the Bay Area had only 1 to 2 buildings completed while Ortigas Center and Mandaluyong has no completions.”
Despite this strong supply delivery, vacancy level dipped to 5% from 6% the previous quarter and is looking to maintain a healthy 4-5% rate by the end of 2019.
The vacancy was still tight in the Bay Area (Pasay and Paranaque) 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 healthy vacancy of 5-6% this quarter.
“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 sqm. 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,” Pronove explained.
Traditional Office Drives Demand
Pronove Tai tracked a total of about 305,000 sqm of actual leasing transactions from July to September 2019. These include leasing and pre-leasing transactions. Of this demand, Traditional Offices accounted for 40% or 122,000 sqm, followed by ITBPM at 32%, Offshore Gaming at 23%, and Flexi-workspaces at 5%.
Pronove continued, “The third quarter proved to be an exceptionally strong period for the Traditional Firms with a significant 61% growth YoY from only 76,000 sqm last year. The top five growing industries were Banking and Finance, Food and Beverages, Insurance, Government Offices, and Real Estate.”
“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 ITBPM accounting for most of the leasing transactions there this quarter.”
Makati and Taguig City Top Rental Rates
Makati and Taguig record the top rents in the city with Makati still at a 21% premium over Taguig rents. Additionally, both districts have recorded the highest rental growth over the year.
“We call on the government to strongly support the business community’s call for ease of doing business particularly in Quezon City where supply is abundant. We are also hopeful that the long awaited Real Estate Investment Trust (REITs) IRR be finally passed for more investment instruments in the Stock Exchange.
As for our clients, we advise them that diversity in their tenancy mix is important and for investors to be diligent in their property acquisitions,” Pronove Tai President and CEO Monique Pronove concluded.