Record-breaking vacancy rates were recorded in the Quezon City property market for the first three months of the year, due to the entrance of a huge chunk of supply and lower pre-commitments made, according to a report by KMC Mag Group.
The emerging business district saw a significant increase in its office market vacancy rate from 1.2 percent in the previous quarter to 10.8 percent during the first quarter of the year, the highest vacancy rate posted by the city in the last five years.
KMC Mag attributed the increase to weaker than expected pre-leasing of newly completed office towers.
It was also noted that Quezon City received most of new office supply that entered Metro Manila during the quarter, accounting for nearly three-fourths of the 120,000 square meters of office space that came online in the first three months of the year.
This was due to the completion of office buildings such as the UP-AyaLand Technohub Building P and Cyberpark Tower One in Araneta Center.
The real estate services firm predicted that vacancy rates of Quezon City for 2016 will remain above 5 percent as two more office towers are expected to be completed later this year, which are estimated to add around 47,000 square meters of new office space into the city’s current stock.
At present, Quezon City’s available office stock stands at 457,183 square meters.
“With the relatively high level of vacancy in the sub-market in the foreseeable future, landlords in Quezon City are likely to become more flexible in lease negotiations, aiming to attract locators and retain existing tenants,” KMC Mag Group said.
Lower vacancy rates elsewhere
Meanwhile, overall the overall vacancy rate in Metro Manila stood at 3.7 percent, with most markets seeing declines.
The central business district of Makati, however, saw a slight rise in its vacancy rate from 2.4 percent last quarter to 2.6 percent during the first three months of the year.
“Vacancy rate increased as 3,100 square meter of previously occupied spaces became available for lease during the quarter,” KMC Mag Group said.
Similarly, vacancy rates in Alabang also slightly inched up to 4.9 percent from 4.8 percent registered in the last quarter, as around 13,000 square meters of office space was completed during the quarter.
“The solid net take-up of nearly 12,000 square meters during the quarter kept vacancy rate of the business district within the single-digit territory,” the report noted.
Despite adding nearly 29,000 square meters of new office space into its stock, Bonifacio Global City managed to lower vacancy rates in the period to 3.8 percent from 5.7 percent posted last quarter.
KMC Mag said this was driven by the strong demand received from notable locators such as Baker & McKenzie Global Services and Uber.
Vacancy rates also remained low for Ortigas Center at 1.7 percent, a decline from 2.1 percent recorded in the last quarter. This was due to the “tightness” of available space in the market.
This was also the case for the Bay Area as vacancy rates remained low at 0.2 percent due to the small amount of available spaces.
KMC Mag noted that the low amount of available space in the Bay Area during the last quarter has also limited the overall level of absorption at the beginning of the year.
Net absorption in the Metro Manila office market remained positive during the first three months of the year as it reached more than 90,000 square meters.
This was driven by the sustained demand arising from the entry and expansion of outsourcing and offshoring companies.