Despite a “commendable rise” in net office takeovers last year, real estate consultant KMC Savills Inc. On Wednesday, they said there would still be vacancy in office space in the National Capital Region (NCR) until at least 2025.
Frédéric Rara, the firm’s senior research and consulting manager, said developers should not expect office space occupancy to exceed 85 percent over the next two to three years.
He said leading sub-markets could prevent a prolonged supply of office space, but the Makati Central Business District (CBD) and Ortigas Center remain at risk if demand for office space from the business process outsourcing sector declines in favor of provincial markets.
“We maintain our recommendation to landlords to prioritize employment over yield in 2023.”
Metro Manila’s office market rebounded last year with a net takeover of around 270,900 sq.
More than a third of the demand was recorded in the fourth quarter as rents continued to decline, down 0.8 percent at the end of the year.
Demand from Bonifacio Global City (BGC) accounted for more than half of the 141,000 square meter annual demand and is expected to be a major driver of Metro Manila’s performance this year.
“We forecast that net uptake will increase slightly in 2023, but may be isolated in major sub-markets such as the Makati CBD, Ortigas Center, Quezon City and the Manila Bay Area,” said KMC Savills.
It states that Metro Manila has an oversupply of office supplies.
“With nearly 1.7 million square meters of vacant Class A office space, another 1.2 million square meters under development, shifting tenant strategies and rising interest rates, the office market is in an unsustainable state at this rate,” the company said in a study. . Note
For Makati, there was huge demand for the One Ayala buildings, located on the site of the former Intercontinental hotel, as the vacancy rate increased to 15.7%.
“Along Ayala Avenue, competition between premium buildings persists as landlords try to outplay each other with better incentives. However, newer buildings have an advantage as tenant demand shifts towards quality and competitive rates.”
However, it says median rents fell 3.4 percent year on year as an aging building stock tugged at the submarket.
At BGC, meanwhile, location preference has enabled landlords to secure single-digit vacancy rates.
“We remain positive on BGC as it dominates Metro Manila (office sector). About 160,000 square meters of green buildings, or more than two-thirds of the supply, are expected to be completed in 2024.”
As far as the housing market is concerned, mid-market products due this year and 2024 must be closely monitored as there is a risk of default among buyers.
He also advised investors to put their money into bonds rather than the housing market, as the sector is expected to be shaky over the next year.