Despite the strong demand office space in Metro Manila, newly completed developments coming online this year will keep the vacancy levels at a healthy rate above 5 percent, a real estate consultancy said.
The vacancy rates in the Metro Manila office market would rise to healthier levels this year, as a large chunk of supply enters the market, said Monique Cornelio-Pronove, CEO of Pronove Tai International Property Consultants, said in a media briefing late Wednesday.
“I see that vacancies will increase to healthier levels than 5 percent. But I also say that if this supply will not move to 2018, there is also a high probability that we will have double-digit vacancy,” Pronove cautioned.
The Metro Manila office stock will hit record-breaking levels this year as with 1.2 million square meters of new office space to be completed, according to a separate report by Pronove Tai.
The supply will come mainly from the projects that were delayed last year due to the lack of skilled labor.
“They’re just catching up. Whatever has not been delivered is going to be delivered in 2017,” Pronove noted.
The vacancy rates in Metro Manila got stuck between 3 to 5 percent in the past five years, which Pronove considers “unhealthy” for the market.
“Any vacancy that is lower than five percent is not healthy – because it does not allow for demand to actually grow within the building or the district. There’s no space to grow,” Pronove explained.
Of the 1.2 million sqm entering the market this year, 280,000 sqm or 24 percent has been pre-committed, according to Pronove. This means that 920,000 sqm of new office space will be available.
“But the good news is that you have pre-commitments already,” Pronove said.
Another positive development is that 150,000 sqm to be completed in 2018 are pre-leased, accounting for 15 percent of the 990,000 sqm to be completed in 2018.
With a strong dose of investor confidence dominating the Philippine market at this point, Pronove noted the unhealthy vacancy levels above 10 percent are unlikely to happen.
A study by the PricewaterhouseCoopers (PWC) and the Urban Land Institute ranked Manila as the top three among 22 Asia-Pacific cities in terms of investment prospects for 2017.
“There has been a strong shift away from the long standing favorite destinations like Tokyo and Sydney in favor of emerging markets, including India, Philippines and Vietnam,” according to the study.
However, the risk might crop up from the office buildings approved and accredited by the Philippine Economic Zone Authority (PEZA), Pronove noted.
“If they don’t get it [signed]. most of these buildings will not be committed or will not be leased,” she said.
BPO companies will not commit to an office building that is not PEZA-accredited, she added.