VACANCY RATE in Metro Manila’s office market improved in the second quarter of 2024, yet rental prices for office spaces have continued to decline since 2023, according to real estate services and investment firm CBRE Philippines.
“This may look good on the upper hand, but zooming into the prices of each sub-district, we have been noting a trend of declines or reductions in rates as well,” CBRE Philippines Research Head Samantha Laureola said during a briefing last week.
Metro Manila’s fair market rents (FMR), which represent the typical rental prices for office spaces, have decreased by 2% to 19% across various sub-districts from the first quarter of 2023 to the present.
The Bay Area’s FMR fell 19% from the first quarter of 2023, followed by a 13% decrease in Makati A&B premium office buildings. Alabang also went down 10%, North Bonifacio declined 3%, and Makati Prime went down 2%.
Meanwhile, Quezon City rose 9% and McKinley inched up by 6%. Ortigas also increased by 2%, and Bonifacio Global City (BGC) rose by 0.4%.
“So lower rates, potentially more attractive lease structures for clients, higher demand, and lower vacancy overall,” she added.
The vacancy rate went down to 17.8% in the second quarter of 2024 from 19.7% in the same period last year.
CBRE also revised its initial forecasted vacancy rate from 18.8% to 22.6% by the end of the year due to the Philippine Offshore Gaming Operators (POGO) ban.
Makati Prime had the highest FMR in the second quarter of this year at P1,289.01, followed by BGC at P1,170.88, while North Bonifacio and the Bay Area logged P1,076.88 and P702.64, respectively.
Makati A&B recorded an FMR of P789.40, McKinley at P834.06, Ortigas at P764.39, Alabang at P671.40, and Quezon City at P735.35.
“Lower FMR for most of the major Metro Manila markets as developers continue to provide aggressive rates to spur transactions,” the firm said.
On a quarter-on-quarter basis, CBRE Philippines Director of Advisory and Transactions Services Garri Amiel Guarnes said the Bay Area had the highest reduction of 7.3% in FMR in the second quarter of 2024.
“That’s a lot to do with the transactions, government take-ups within the Bay Area, and the high number of square meters being taken by the government offices,” he said.
The office market logged 257,200 square meters (sq.m.) of office leases for the second quarter, driven by government take-ups that accounted for a 26% share.
Some of the biggest government leases during the first half went to Filinvest, including the National Bureau of Investigation in Cyberzone Bay City Towers and the Department of Trade and Industry in Filinvest Buendia.
Despite CBRE’s expectation that the vacancy rate by year-end will hit 43% due to the POGO ban, the Bay Area was the top district for the second quarter of 2024 with 83,400 sq.m. of leases in the country.
SERVICED OFFICE VACANCY RATE HIT 20.6%
Meanwhile, the vacancy rate of Metro Manila’s flexible market — comprising coworking spaces, serviced offices, and short-term leases — surged 20.6% to 7,000 vacant seats in the second quarter due to the opening of new sites across the area, CBRE Philippines said.
This figure was 6.75% lower than the 14% vacancy rate in the same period last year, and lower than the 17% recorded last quarter.
CBRE Senior Research Analyst Angela Joyce Sumalinog said the increase in vacancy was driven by the opening of new sites in Metro Manila, where Fort Bonifacio recorded the lowest vacancy rate at 11%.
North Bonifacio’s vacancy rate fell to 10% in the second quarter, while BGC also decreased to 10%. McKinley’s vacancy rate rose to 18%.
The vacancy rate in Makati increased to 19%, Ortigas doubled to 24%, and Quezon City reached 22%. Meanwhile, the Bay Area and Alabang saw increases to 25% and 52%, respectively.
“Another factor that we’re seeing that can affect the flex market would be comparing serviced offices versus vacated spaces with quality fit-outs. The former would often have a premium on rates of 50% to 80% over three to five years,” Ms. Sumalinog said.
CBRE reported that Metro Manila rates range from P5,000 to P36,000 per seat per month. — Aubrey Rose A. Inosante
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The article was originally published in Business World.
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