Manila is the “cheapest” place to set up an office in Asia Pacific or anywhere in the world.
“The Philippines is one of the cheapest markets in the region, maybe in the world, and that’s not because demand is slow. The demand is very high. It’s just that the supply is also meeting the demand so much,” said David Leechiu, country head and international director of Jones Lang LaSalle Philippines Inc. (JLL).
“The reason why, for example, Hong Kong, Singapore is so expensive [is]because everyone wants to go there, but there is not enough supply,” he told the Asia CEO Forum held in Makati City on Tuesday.
According to JLL data on office rents in Asia for the first quarter of 2014, Manila has one of the lowest rates at $20 per square foot (psf) per annum, followed by New Delhi at $35; Sydney at $35; Seoul at $50; Tokyo at $70; Shanghai at $75; Singapore at $85; and Hong Kong at $135.
But the company said retail rents are growing.
Meanwhile, JLL said office rental growth varied across Asia Pacific in the first quarter compared to year-ago levels, with Jakarta recording growth of 18 percent; Singapore, 12 percent; Manila, 5 percent; Tokyo, 5 percent; Shanghai, 4 percent; Hong Kong, 1 percent; Mumbai, 1 percent; and Sydney, minus 2 percent.
“So Manila for now is still cheap because the supply is strong, just like the demand is strong, right? But I think that could change. I think for 2017, most of Bonifacio [Global City] would be fully developed. There is no more land in Makati, there would be very few property [projects]in Ortigas, very few properties in Quezon City, and Mall of Asia would be pretty well developed, so in 2017 there would be very few districts to develop,” Leechiu said.
JLL said capital value for office rentals are expected to grow by 10 to 20 percent for Manila and Tokyo, 5 percent to 10 percent for Singapore, and zero to 5 percent for Shanghai, Hong Kong and Mumbai.
The company also said that as of 2012, total space committed was 482,000 square meters, with 365,000 square meters of this amount for office space lease. Of this figure, 29 percent is from Bonifacio Global City; 19 percent from Makati, 16 percent from Manila; 16 percent from Pasig and Pioneer in Mandaluyong; 16 percent from Quezon City; and 6 percent from Alabang.
It said total space committed as of end-2013 was 470,750 square meters, of which 185,520 square meters was for lease of office space.
Earlier reports quoted KMC MAG Group managing director Michael McCullough as saying that the Philippines is still the “cheapest” place to set up a company anywhere in the world. He said setting up a company in the country would cost only $45,464 a year, including $12,500 for a software developer, $10,800 for a graphic designer and $9,984 for office space.
According to KMC MAG Group, the most expensive places for relocating a business operation are London, San Francisco, Mumbai, Paris, New York, Moscow, Shanghai, Tokyo, Singapore, Hong Kong and Sydney.
In October last year, KMC MAG Group said the country was still the best value city to do business in largely because of the relatively low real estate costs.
The company has seen continuously low vacancy rates because of a strong take-up rate within central business districts (CBDs).
“And so I think you’re going to see a falling of supply in the core business districts like Makati, Bonifacio, and Mall of Asia,” Leechui said.
“Maybe it will become expensive at that time—FTI [Food Terminal Inc.], a bit of Mall of Asia in the Bay area. I think the new projects of Ayala in the North and all these SM properties all around the Philippines would become very valuable assets, because they’ll be the only options because Makati and Bonifacio will be taken out of the equation,” he added.
Asia CEO Forum president Rebecca Bustamante concluded: “It’s about time for us to make the Philippines the business hub in Asia. Together we can make it happen.”