18 August 2014
Makati City – In a press briefing held recently, Colliers International announced that more than 480,000 square meters of office space is expected to be delivered in 2014, one of the highest in recent years. Julius Guevara, Director of Research & Advisory Services, said that the expanding operations of BPO companies in the country caused the uptick in office supply. “This will be the highest turnover of office supply in recent years, even eclipsing 2009 levels,” Guevara said.
Because of cost considerations by BPO companies, developers have responded by building office projects outside the Makati CBD. As of the second quarter of 2014, five office buildings were completed in Fort Bonifacio, Ortigas Center, and Quezon City. The recently completed buildings were: RCBC Savings Bank Corporate Center in Fort Bonifacio, Cyberscape Alpha and Beta and Marco Polo Manila in Ortigas, and SM Cyber West Avenue in Quezon City.
While no supply was reported in the Makati CBD, companies continue to establish operations in the area as vacancy dropped by 50 percent, to 2.1 percent in the period. Fast take-up in Zuellig Building and V Corporate Center by BPO companies contributed to the steep decline in vacancy. “We have recently closed a leasing deal with a BPO company to occupy one floor in V Corporate Center, and they were very pleased with the transaction,” Jie Espinosa, Director of Office Services, said.
On the other hand, Fort Bonifacio and Ortigas Center breached 5% vacancy levels due to the impact of new supply being delivered. “This increase in vacancy should not be a concern, because we expect that the new supply will be absorbed by the market in three to six months. In fact, we are receiving inquiries from BPO companies to locate in Cyberscape Beta, one of our managed buildings.” Espinosa said.
As a result of the strong demand, rental rates increased at a much faster rate this quarter. In the Makati CBD, office rates increased between 3 and 4% for Premium and Grade A buildings, and 9% for Grade B buildings. “The increases that we have seen in the Makati CBD indicate that companies prefer newer buildings, which provide better quality in terms of space planning and technical specifications. As long as the companies can see this, they are willing to put cost as a secondary consideration,” Romeo Arahan, Research Analyst, explained. Fort Bonifacio and Ortigas lease rates grew between 2.5 and 3% this period.
Despite the faster rental growth this quarter, Manila remains to be the cheapest capital city in the Asia Pacific to occupy prime office space at 22 USD per sq m per month. Hongkong charged the highest rents in the region, at 103 USD per sq m per month.