Steady supply curbs CBD office rent increase

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RENTAL rates in Metro Manila’s central business district (CBD) offices rose slightly in the third quarter, a trend that is likely to continue through to next year when contruction of more office buildings gets completed, global consultancy firm Jones Lang Lasalle (JLL) said in its third quarter report.

JLL said rents in the CBDs rose 3.5 percent on the average in the third quarter from the same period last year at about P895 per square meter a month.

JLL sees rental rates still increasing, but only slightly in the next two quarters, as demand for office space continues, mainly from offshoring and outsourcing (O&O) firms.

At the same time, competition from incoming office buildings is likely to curb an upward movement in rental rates, the research agency noted.


“Rents are expected to grow at a slower pace due to competition from new supply,” reported Claro Cordero, Jr., JLL head of research in the Philippines.

JLL said vacancy rate in Metro Manila’s CBDs was 4.8 percent in the third quarter, slightly increasing from 4.3 percent in the second quarter, as newly completed developments were not fully leased out upon completion.

Despite the vacancy rate’s increase, however, Grade A developments in Makati CBD and
Bonifacio Global City (BGC) continued to enjoy high occupancy, according to the report.
JLL said rents registered a modest quarter-on-quarter growth of 0.2 percent, supported by stable office demand, mainly from O&O firms.

It said vacancy rates are likely to rise in the next two quarters, as some 200,000 square meters of office space are scheduled to be completed at that time.

JLL said net absorption in the Makati CBD and BGC significantly increased in the third quarter of 2015 to 86,400 square meters from12,000 square meters in the second quarter.
JLL said O&O firms, as well as technology-related and other services, were the main drivers of demand for CBD office space.

“Notable lease transactions in 3Q15 included an O&O firm renewing its lease in a built-to-suit development in Makati CBD, an e-services firm taking up 2,100 square meters in newly completed Net Park, and a business services firm pre-committing to 2,000 square meters in Uptown Tower 3 in BGC,” reported Cordero.

The report noted that four office developments were completed in the third quarter of 2015, which adds 102,800 square meters to the current office supply.

The completed developments were the MDI Corporate Center, Net Park, and Cocolight in BGC and the 8 Rockwell in Makati.

Meanwhile, JLL said capital values are expected to increase further, supported by the favorable investment outlook of the country.”

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