The Metro Manila office property market will be the biggest market in Southeast Asia this year, accounting for the bulk of regional supply that is expected to grow by 13 percent, property services firm Cushman and Wakefield said on Tuesday.
In a report, Cushman and Wakefield forecast that Southeast Asia would see a “construction boom” over the next 12 months as nearly 22 million square feet of new office property supply is current under construction in the region.
Nearly half of this is accounted for by the Metro Manila office market, which expects a total of 11 million square feet of office space to come online this year.
In addition, Cushman and Wakefield noted that a total of 22.3 million square feet of office supply is set to enter Metro Manila office market from 2017 to 2018.
Following Manila in terms of largest upcoming supply this year is Jakarta with a total of 5.9 million square feet of completions, and Singapore with 2.2 million square feet.
With the large amount of supply expected to enter the region, the report noted that average vacancy in the region is expected to increase to 14.8 percent from its current 10.6 percent over the next 12 months.
Despite Manila accounting for a bulk of the new building completions this year, Cushman and Wakefield noted that is still among cities that will post the lowest vacancies in the Asia Pacific region.
“While over a quarter of new projects will be located in offshoring hubs, Bengaluru, Hyderabad, Pune, and Manila will boast among the lowest vacancies (circa 5 percent) in 2017,” Cushman and Wakefield said.
“A booming IT-BPO, services, and manufacturing sectors will continue to fuel rapid absorption in those cities and allow landlords to strengthen leverage,” the report added.
However, Cushman and Wakefield mentioned that the lingering questions over the long-term prospects of the IT-BPO sector, considering the changing political landscape inciting protectionism across the globe could potentially cause an oversupply issue in the offshoring hubs.
“Though none of the major tenants have pulled out or put off expansion plans even with all the political noise, a setback in IT service exports growth could trigger an oversupply in those cities as their office inventory will expand by 7-22 percent per year through 2020,” the report said.
Moreover, with the low projected vacancies in the offshoring hubs, rental rate growth in these tight markets will remain “unabated,” according to the report.
“At the same time, rents in Bengaluru, Hyderabad, Manila, and Guangzhou are expected to record new highs through 2018,” Cushman and Wakefield said.