Office space vacancy in Metro Manila seen rising
Vacancy rate in Metro Manila’s office space sector is expected to widen to 8 percent by end of 2018, amid the completion of new buildings and tepid demand, real estate services firm KMC Savills said Tuesday.
KMC Savills said the office space sector, mainly driven by the growth of the business process outsourcing industry, could see a total inventory of 1.56 million gross leasable area in 2018, absorbing the spill-over in 2017 which was the highest on record.
It said the sector posted the highest starting inventory at 761,100 square meters, and another 800,000 sqm of projects were up for completion in 2018.
KMC Savills said that as a result, untenanted office space might double to 8 percent by end-2018 from 4.5 percent last year when net take-up reached 629,500 sqm.
“This is not yet a cause for worry. Any government administration experiences a slump, one time or another during its tenancy. By the third year of this new administration and nothing has improved yet, this should be worrisome,” said KMC Savills research manager Fredrick Rara.
KMC Savills said the approval of new applications for BPO companies and the pending applications for expansion would help taper the increasing vacancy rate and put to good economic use the unutilized office space.
The Bay Area submarket ended 2017 with 214,200 sqm of GLA with about 3.9-percent vacancy rate while enjoying the highest rental growth among submarkets in the fourth quarter. The average monthly rental rate in the area was P745.2 per sqm.
About 50 percent of new office space in the Bay Area were occupied by Philippine offshore and gaming operators.
Bonifacio Global City accounted for the highest influx of completed office space last year with 375,700 sqm. Strong market appetite in the submarket was still apparent after it registered a net absorption of 314,200 sqm, keeping vacancy manageable at 5.4 percent.
Alabang CBD also posted a record entry of new stock with 89,900 sqm additional office space, while vacancy rate increased slightly to 2.2 percent percent from 1.7 percent in 2016.
Other submarkets, such as Ortigas Center and Quezon City, experienced a spike in vacancy rates. The introduction of the IBP Tower in Ortigas provided 20,400 sqm of new office space, but net absorption reached 2,700 sqm.
The quick take-up of Vertis North in Quezon City marginally improved market conditions in the submarket but its overall vacancy rate remained the highest among all the submarkets at 9.9 percent.
Meanwhile, average rents in Metro Manila grew at a more moderate rate of 3.5 percent year-on-year.
Makati CBD commanded the highest rental rate among the submarkets with an average of P1,047.3 per sqm a month.
“More than a third of the space pipeline will be in BGC while Quezon City will welcome close to a quarter of Metro Manila’s new supply. Quezon City may yet again drag the overall market performance this year, but this should be mitigated by other submarkets with impressive absorption rates,” Rara said.