Bay Area office rents seen rising 30% in next 4 yrs

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OFFICE rents in the Bay Area are expected to grow by 30 percent in the next few years, as it is seen to be the third largest business district by end-2019, mainly driven by the upcoming infrastructure projects, a real estate services firm said on Thursday.

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In a media briefing, KMC Savills Inc. head of research Antton Nordberg said office rental rates for Grade A office spaces in the Bay Area are seen to rise in the coming years.

“I think P800-P850 [per square meter per month]is very feasible in the next three to four years. That’s about 30 percent growth,” Nordberg said.

At present, Nordberg noted that average rental rates are at around P600 to P650 per square meter per month.
“In the past two years, it’s been growing double digit,” he said.

But Nordberg noted that the pace of increase in rental rates may slow somewhat since lower office rates are one of the selling points of the Bay Area.

“I think it will also slow down a little bit, because it’s also one of their key selling points [lower rental rates]if you would compare it to BGC and Makati, which are at P800 to P1000 [per square meter per month],” Nordberg explained.

To date, the average asking prices for top business districts Makati CBD and Bonifacio Global City are at P1,010.80 per square meter per month and P889.60 square meter per month, respectively.

KMC Savills managing director Michael McCullough told reporters that the Bay Area has been receiving robust
demand from the Outsourcing and Offshoring (O&O) sectors.

Among the companies that have leased office spaces in the Bay Area for their outsourcing activities are TeleTech with 31,500 sqm, Telstra with 30,000 sqm, E-performance with 15,000 sqm, VXI with 7,800 sqm, Visa with 6,200 sqm, Royal Caribbean International with 4,000 sqm and Harte Hanks with 2,500 sqm.

Current office stock of the Bay Area is at 326,737 square meters, while a total of 535,615 square meters of office space is expected to come online until 2019.

Of the upcoming office supply, about 100,000 sqm has already been pre-leased.

With the robust demand for office spaces, KMC Savills said it expects the Bay Area to be Metro Manila’s “next BPO hub” and the third largest office district in the coming years, following Makati and BCG, driven by the large chunk of office space to be completed by 2019.

The firm noted that the Bay Area is forecast to end 2019 with a total of 862,400 square meters of Grade A office stock.

“The whole reason we like the Bay Area so much is because of the infrastructures coming online,” McCullough said.

Among the big ticket infrastructure projects that are seen to benefit the Bay Area are road projects such as the Cavite Expressway, NAIA Expressway, NLEX-SLEX Connector Road, Metro Manila Skyway Stage 3.

McCullough also noted that the LRT-Line 1 Cavite Extension, the South Integrated Transport System and the
SouthWest Integrated Transport System will work to the advantage of the Bay Area as well.

Nordberg noted that another selling point of the Bay Area is the dynamic mix of property sector it offers.

“It’s a very nice mix. It’s very dynamic. It has entertainment component, it has retail component and you have a growing residential community and you have a growing office sector. Everything is there,” Nordberg said.

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