The Philippines ranked as the most cost-effective office destination in Asia Pacific at a prime rent of $22 per square feet per annum, a survey among major business districts undertaken by international property consultancy group CB Richard Ellis (CBRE) revealed.
In its first quarter 2012 market view findings, CBRE Philippines said the competitive lease rates in the Philippines is a boon to the growth of demand for office buildings.
It noted that concerns relating to the bleak economic outlook in the euro zone and US and the highly publicized anti-outsourcing bill has so far not weighed in adversely on the demand for offices in the country.
“On the contrary, demand is still growing and the pre-leasing market is back since the US sub-prime crisis affected the local office sector. Demand is quickly catching up with supply as office space requirements are showing no signs of a slowdown,” CBRE said.
Throughout the first quarter, prime and grade A offices in major business districts posted more than 96 percent occupancy rate on the average. While demand continues to grow primarily due to the sustained expansion of the outsourcing and off shoring industry, new supply remained scarce.
The limited turnover did little to ease the tight supply situation in the market. Supply pressures resulted to the further increase in lease rates of BPO offices.
In Makati, average vacancy rate declined from 4.47 percent in the fourth quarter of 2011 to 3.43 percent in the first quarter this year. CBRE said the consistent growth in demand for traditional offices by multinational and local companies coupled with the lack of new completions is sustaining the supply pressures in the business district.
Average lease rate increased from P818 per square meter per month in the fourth quarter of 2011 to P831 per sqm. per month in the first quarter of 2012.
Demand for office space in the Makati central business district is expected to be sustained as flight to quality increases. Additional supply is expected for turnover in the second half of the year to augment the supply of both traditional and BPO offices.
Meanwhile, average vacancy rate in Fort Bonifacio went down to 1.74 percent from 4.16 percent in the previous quarter with the higher absorption of offices turned over in the second half of 2011.
CBRE said office buildings in the business district continue to benefit from the stable growth in the requirements of outsourcing and offshoring companies. Average lease rate inched up 8.03 percent from P697 per sqm. per month in the fourth quarter of 2011 to P753 per sqm. in the first quarter of 2012.
Several buildings are up for completion in the succeeding months which will improve the supply situation in the business district. Vacancy rate, however, is not anticipated to rise drastically given the high pre-commitment levels of upcoming offices. The most notable among the pre-leasing activities is the expansion of operations of Wells Fargo & Co. in McKinley Hill. A new business support center will be set up in the business district which will be part of the company’s non-core business activities in the country.
CBRE also reported that the stronger demand for traditional offices in the Ortigas Center has brought down the average vacancy rate to 3.72 percent from the previous quarter’s 5.6 percent. Average lease rate increased 4.1 percent from P537 per sqm. per month in the previous quarter to P559 per sqm. All of the upcoming offices in the business district will cater to BPO companies with additional supply expected for turnover starting in the fourth quarter.
Among the major business districts, Alabang has the lowest average vacancy rate as all BPO buildings are already fully occupied. Average vacancy rate is now at 0.41 percent, declining from the previous quarter’s 3.84 percent.
CBRE said although lease rates in most buildings have increased as a result of the strong demand from BPO companies, average lease rate decreased slightly from P543 per sqm. per month in the previous quarter to P537 per sqm. due to the lower lease rates of traditional offices.
In Quezon City, average vacancy rate increased slightly to 2.73 percent from 2.33 percent in the fourth quarter of 2011. The trend in lease rates, however, is in the opposite direction as average lease rate rose to P569 per sqm. per month from last quarter’s P519 per sqm., it stated in its report.
(Story courtesy of Mary Ann LL. Reyes of The Philippine Star)