TRADITIONAL OFFICES TOP DEMAND : Q2 2018 Metro Manila Office Market Overview

MAKATI CITY, PHILIPPINES  July 18, 2018 – “Former top demand driver ITBPM dropped to number two in terms of actual take up in the second quarter,” Pronove Tai International Property Consultants’ CEO, Monique Pronove said at the firm’s Q2 Metro Manila Office Market Overview today.

Traditional office users largely from construction and architecture companies (32%), banking and finance (16%), insurance (15%), real estate (8%) and medical and healthcare (6%) among others moved to number 1 while the Philippine Offshore Gaming Operators (POGO) remained as the number 3 source of demand.

Both traditional and POGO demand drivers increased its take up by 16% and 6% respectively over the same period.

100% Delivery Rate

Pronove Tai recorded approximately 194,000 sqm of office completions that were added to the office stock in the Q2, a decrease of 22% quarter on quarter. While this marks a 100% delivery rate as projected for this quarter, this decrease in supply in an already tight supply market resulted in vacancy rates dropping from 5% to 4% quarter on quarter.

Of this new supply, 40% or 77,000 sqm came from buildings completed in the Bay Area. The Bay Area (Pasay City and Paranaque City) regained its position as the fastest growing district at 10% growth in stock after registering no completion in Q1. Muntinlupa City also posted notable growth at 8% or 39,000 sqm.

Q2 OMO

Still the largest office district, Makati City accounts for 3.3M sqm or 33% of the total 10.2M sqm stock as at end of June 2018. Makati City is followed by Taguig City and Ortigas Center at 2M sqm and 1.6M sqm, respectively.

Mandaluyong City and Quezon City record highest vacancy rates among 11 districts surveyed

While Mandaluyong City and Quezon City recorded vacancy of 12% and 10%, respectively, all the other districts recorded unhealthy levels below 5%. In particular, Muntinlupa City was at the lowest at 1%, Makati City remained tight at 2%, and Bay Area logged in 3%.

 Traditional Office: No. 1 Demand Driver

“Compared to Q1’s 262,000 sqm actual take up, Q2 only recorded 214,000 sqm. It slowed down by 18% QoQ,” Pronove commented. Of this actual take up, Traditional Offices accounted for the biggest share at 43% with the ITBPM sector trailing at 32% and Offshore Gaming at 24%.

ITBPM saw a 50% decrease from 135,000 sqm in Q1 to only 69,000 sqm in Q2. ”This was a significant drop and definitely something we should watch out for in the coming quarters. The slowdown in terms of take up from ITBPM could be attributed to the uncertainties brought about by the second package of TRAIN (Tax Reform for Acceleration and Inclusion),” she continued.

Offshore Gaming Still Unwelcome

Despite being a strong demand driver, the Philippine Offshore Gaming Operators (POGO) faced challenges in being absorbed into their preferred office buildings. “POGOs are a huge market but there are difficulties for them in terms of perception. We have advised our clients to look at POGO in the perspective of how manning agencies and call centers have evolved.”

“Offshore gaming take-up increased by 6% QoQ as evidenced by new absorption of POGO offices in the cities of Las Pinas, Mandaluyong, and Pasig.”

Preferred Office Districts

Makati City maintained its position as the preferred destination for offices. 34% of the total actual take up in Q2 went to Makati, followed by Ortigas Center at 15%. “The country’s premier business district was still where most of the demand had been. This has resulted in an increase of 4% from the previous quarter. Average monthly rentals of Grade A building was at around Php 1,500/sqm/month. Makati rentals are at a 24% premium over Taguig City.”

“There was a general atmosphere of uncertainty within the business sector. We should allay this by ensuring a stable and predictable business environment as well as by speeding up the implementation of the Ease of Doing Business Act,” the Pronove Tai CEO concluded.

To request for a full presentation on the quarter’s property market, contact us at info1@pronovetai.com.