AVERAGE office rental rates in the Ortigas business district are expected o increase in the coming quarters due to a lack of new supply amid sustained demand, a real estate services firm said.
“Lack of supply along with the sustained demand for office spaces in Ortigas Center are likely to support rental rate increases in the business district for the remainder of the year,” KMC Mag Group said in a market note.
In the first quarter of the year, average rental rates in the Ortigas Center increased slightly by 1.4 percent to P632.2 per square meter per month from the P623.7 per square meter per month posted in the previous quarter, driven by strong occupier demand.
In a separate report, Colliers International echoed KMC Mag Group’s forecast, noting the improvement in vacancy rates driven by the take-up of buildings.
“Ortigas Center also registered a lower vacancy rate of 1.1 percent from 1.5 percent in the last three months of 2015,” Colliers said. “The improvement is attributed to robust take-up in both Grade A and Grade B buildings.”
Net absorption during the quarter registered at around 2,300 square meters, according to KMC Mag Group.
As of the first quarter of 2016, Ortigas Center’s current office stock stood at around 635,199 square meters. Around 110,789 square meters of new office space is expected to enter the market until 2018.
“In terms of new supply, Ortigas won’t be seeing new developments for the remainder of the year, and is only expected to have an estimated 100,000 sq m++ additional stock in 2017 and 2018,” KMC Mag Group said.
In contrast, other business districts are likely to see decreases in rental rates due to the large amount of supply expected to come online in the coming years.
“In the next few years, downward pressure on rental rates are likely to persist as record high levels of upcoming supply are expected to enter the market,” KMC Mag Group said.
Most of the Metro Manila business districts, except for Makati City, are expecting a large amount of supply to come online until 2019, with Bonifacio Global City accounting for bulk of the supply at 928,010 square meters. This is followed by Bay Area with 377,754 square meters in the pipeline, Alabang with 305,431 square meters and Quezon City with 124,244 square meters.
The Makati Central Business District is seen to account for the least amount of supply in the pipeline with 74,556 square meters expected to come online until 2019.
“With the surge in new office spaces, landlords are seen to become more flexible in lease negotiations, aiming to retain existing tenants and attract new locators,” KMC Mag Group said.