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Occupancy rate in MM’s office spaces remain strong at 81%
Jul 11, 2022

Based on data culled from the first half of 2022, vacancy rate in office space for Metro Manila stands at 19% with the remaining 81% leased.  Moreover, 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 meter (sqm).

The office market is dominated by Metro Manila’s three major business districts, namely: Makati, Taguig, and Pasig. By the end of 2021, Makati still had the largest supply of office space with a total of 2.8 million sqm, with an identified pipeline of 307,000 sqm which is expected to be completed from 2022 until 2028. Using the same time frame and premise, Taguig has an office space supply total of 2.7 million sqm, with 250,000 sqm of office space in the pipeline and total office vacancy of 250,000 sqm, while Pasig has a total of 2.0 million sqm of office space supply, 139,0000 sqm in the pipeline, and 388,000 sqm of total office space vacancy.

Metro Manila’s five other up and coming business districts are Mandaluyong, Quezon City, Alabang, Bay City, and Paranaque. Mandaluyong has 890,000 sqm of total office supply space, no office space supply in the pipeline, and 280,000 sqm total office space vacancy. Quezon City is fast becoming a prime business location with 1.8 million sqm of total office space supply, 413,000 sqm of office space in the pipeline, and 763,000 sqm of total office space vacancy. Alabang has 774,000 sqm of total office space supply, 141,000 sqm office space supply in the pipeline, and total office space vacancy of 295,000 sqm Bay City boasts of 978,000 sqm of office space supply in total, 323,000 sqm supply in the pipeline, and office space vacancy totaling 618,000 sqm Paranaque’s office space supply amounts to 330,000 sqm, 81,000 sqm of office space in the pipeline, and vacancy of 274,000 sqm of office space.

Tower 6789

Average office space rent and land values

Average office space rent in Metro Manila business districts currently remains unmoved compared to pre-pandemic rent at Php 1,110/sqm.

Land values, on the other hand, range from Php 400,000 – Php 1,000,000/sqm in Makati and Taguig; Php 280,000 – Php 350,000/sqm in Pasig; Php 120,000 – 230,000 /sqm in Mandaluyong; Php 170,000 – Php 230,000 /sqm in Quezon City; Php 250,000 – Php 400,000 /sqm in Alabang; and Php300,000 – Php 500,000 /sqm in Bay City.

Demand

BPOs lead the demand drive for office space in Metro Manila representing 46%, online gaming demand dropped to 1% due to several regulatory issues and the lockdowns implemented during the pandemic, and a variety of other industries represent the remaining 53% of Metro Manila office space demand drive.

Opportunity is seen for office space tenants and locators due to the 19% 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%.

Townships

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.

The Provincial Office Property Market

There are six locations in the Philippines considered to be 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.

There is a 25% vacancy rate across all provincial business districts and 500,000 sqm of provincial office space supply currently in the pipeline. Average rent of provincial office space stands at Php 610/sqm. This, plus the availability of labor supply in the provinces, makes provincial offices an attractive alternate office location.

Outlook

Lobien Realty Group (LRG) is very optimistic about the state of the Philippines’ office property market in particular and based on the data and sentiment prevailing in the market, real estate industry stakeholders seem to share LRG’s optimism due to the following reasons:

  1. Back-to-office directive for those BPO’s operating in PEZA areas which will increase demand by approximately 400,000 sqm over the next six months;
  2. Mobility is back which allows companies to operate pre-pandemic levels which will restart growth and increase labor demand, and consequently, office spaces; and
  3. Post-pandemic office arrangements that will require larger office spaces to ensure social distancing to pandemic-proof office spaces.

Although hybrid office arrangements are expected to be instituted by several companies, this is not expected to significantly affect the office space market due to the current telecommunications infrastructure and the preference of local businesses for physical presence of employees in the offices.

Finally, with the new administration, clearer regulatory and taxation guidelines and the easing of mobility restrictions due to high vaccination rates and non-recurrence of COVID-10 surges, online gaming locators may return to the Philippines which is expected to significantly increase office space demand.



Read more: https://business.inquirer.net/352348/occupancy-rate-in-mms-office-spaces-remain-strong-at-81#ixzz7YhWNY9AE