Supply of new office space is expected to rebound in the last quarter of the year after a “relatively quiet” third quarter, real estate services firm KMC Savills Inc. said in a report on Monday.
KMC Savills said that the Metro Manila office market had a quiet third quarter of the year as only 18,000 square meters of office space was turned over in Bonifacio Global City.
“The market was relatively quiet in Metro Manila with fewer supply additions due to several building completions postponed to later quarters,” KMC Savills said.
In a separate report by Colliers International, project delays in the third quarter of the year were mainly attributed to the lack of skilled labor.
“The delivery of office buildings is hindered by construction delays brought about by the tight labor situation,” Colliers said.
The report noted that this problem has also “plagued other property sectors as well, such as residential, retail and leisure.
“Colliers encourages developers to firm up training partnerships with the government’s skills development agency to tap available labor supply from the countryside,” the report said.
KMC Savills said that new office supply is expected to soar in the fourth quarter of the year.
“In 4Q/2016, supply additions should return as the market is expected to introduce another 193,300 square meters of Grade A office space,” KMC Savills’ report said.
Although new building additions were low in the third quarter of the year, the report noted that occupier demand remained strong during the period.
“Occupier demand was still strong though, as the market recorded a net absorption of 24,900 square meters, which resulted in the vacancy rate to further drop to 2.7 percent in 3Q/2016,” KMC Savills said.
According to the report, Bonifacio Global City witnessed a significant amount of demand in 2016 as it posted current net absorption of 198,200 square meters of office space, which exceeds its current office completions of 170,400 square meters.
“With 40 percent of BGC’s incoming office space in the next 12 months already pre-leased, we still expect the strong demand to carry over to the next quarter,” the report said.
KMC Savills said that it expects a gradual increase in vacancies in the coming quarters due to the completion of large amount of office buildings.
The report explained that a total of 871,900 square meters of office space is expected to be completed in the next 12 months.
The expected large amount of new deliveries over the next 12 months may put additional pressure on lease rates in Metro Manila as vacancies are expected to rise.
Average rents in the Metro Manila office market rose moderately by 3.4 percent year-on-year in the third quarter, a slight slowdown from 4.4 percent rise in the previous quarter.