Metro Manila’s office market is poised to a strong recovery starting in the fourth quarter of 2022, according to property consultancy Lobien Real Group (LRG).
Based on data culled from the first half of 2022, vacancy rate in office market in Metro Manila stands at 19 percent with the remaining 81 percent leased.
LRG said demand for office space in Metro Manila is seen to improve and will be adequately met by the office space supply in the pipeline which is currently pegged at 1.7 million square meters (sq.m.).
The office market is dominated by Metro Manila’s three major business districts, namely: Makati, Taguig, and Pasig.
LRG said in a report said Makati still had the largest supply of office space with a total of 2.8 million sq.m. as of end 2021. Makati has a pipeline of 307,000 sq.m. which is expected to be completed from 2022 until 2028.
LRG said Taguig had an office space supply total of 2.7 million sq.m. at the end of last year, with 250,000 sq.m. in the pipeline and total office vacancy of 250,000 sq.m. Pasig had 2 million sq.m. of office space supply, 139,0000 sq.m. in the pipeline, and 388,000 sq.m. of vacancy.
The office supply in Metro Manila’s five other up and coming business districts are as follows: Mandaluyong had 890,000 sqm; , none in the pipeline, and 280,000 sq.m. in vacancy; Quezon City which is fast becoming a prime business location had 1.8 million sq.m. supply, 413,000 sq.m. in the pipeline, and 763,000 sq.m. vacancy; Alabang had 774,000 sq.m. supply, 141,000 sq.m. in the pipeline, 295,000 sq.m. vacancy; Bay City had 978,000 sq.m. supply, 323,000 sq.m. in the pipeline, 618,000 sq.m. vacancy and; Paranaque, 330,000 sq.m. in supply, 81,000 sq.m. in the pipeline, and 274,000 sq.m. vacancy.
LRG said the average office space rent in Metro Manila business districts was unchanged compared to pre-pandemic rent at P1,110 per sq.m.
Land values per square meter range from P400,000 to P1 million in Makati and Taguig; P280,000 to P350,000 in Pasig; P120,000 to P230,000 in Mandaluyong; P170,000 to P230,000 in Quezon City; P250,000 to P400,000 in Alabang; and P300,000 to P 500,000 in Bay City.
LRG said business process outsourcing leads demand for office space in Metro Manila representing 46 percent. Online gaming demand dropped to 1 percent due to several regulatory issues and the lockdowns implemented during the pandemic, and a variety of other industries represent the remaining 53 percent of Metro Manila office space demand drive.
LRG sees opportunity for office space tenants and locators due to the 19 percent vacancy rates, ample supply of office space pipeline in all office space grades and the possible weakening of rental rates for landlords to shed the available office supply in the market.
Historically, office vacancy rate was at 5 percent, it said.
According to LRG, the lockdowns that were implemented in Metro Manila will make the township developments an attractive location for offices and residential units in the post-pandemic era.
LRG identified six locations in the Philippines as centers of excellence: Metro Manila, Metro Cebu, Metro Clark, Metro Bacolod, Davao City, and Iloilo City. New Wave cities or alternative investment hubs outside Metro Manila which promote country-wide improvement, create job opportunities and economic advancement in their respective regions are: Baguio City, Cagayan De Oro City, Dagupan City, Dasmarinas City, Dumaguete City, Lipa City, Malolos City, Naga City, Sta. Rosa City, and Taytay Rizal.
Vacancy rate across all provincial business districts is even higher at 25 percent. Supply pipeline is 500,000 sq.m.
Average rent of provincial office space stands at P610 per sq.m. This, plus the availability of labor supply in the provinces, makes provincial offices an attractive alternate office location, according to LRG.