Business World Special Feature: "Going Strong"

Michael McCullough, Office Market, Office Space, Manila Office Space, BusinessWorld, Metro Manila, Research, Office, Market Report, Research Report, Industry Insights

Business World recognized KMC Savills as one of the most reliable real estate consultancy firms in the country. This is the excerpt from our interview:

The office property market was generally healthy during the first six months of the year. "We had record new office supply in the first half," said Fredrick Rara, research manager at KMC Savills, Inc., a real estate services firm based in Bonifacio Global City. "We thought we'd have double-digit vacancy rates at the end of the first half."

As of the second quarter of 2017, vacancies stood at 4.2%, the latest KMC report noted. A total of 264,300 square meters (sq. m) of new office space was completed during that quarter, a number significantly higher than the 162,200 sq. m recorded in the first quarter of 2017.

Strong occupier demand helped prevent the vacancies from ballooning. KMC said in its report that the performance of the market went beyond what it had initially estimated for 2017 because of strong leasing activity in the major submarkets it covers. "We're surprised, but we're happy that the market is still sustaining the take-up," said Michael McCullough, managing director of KMC Savills.

The firm observed a slowdown in rental growth during the second quarter in a number of submarkets, a sign that there was supply pressure. "Keeping rents affordable during this massive inflow of completions should sustain the take-up velocity in Metro Manila. We believe a critical factor on the first half's impressive performance is due to landlords' willingness to negotiate rents in order to stay competitive," it said.

From a landlord's point of view, the trend might not exactly be a cause for relief. "It may hurt the landlord in the short term, but if you fill that building as quickly as possible, still the better for them in the long run," Mr. Rara said. "That's maybe why there's an acceleration of the take-up."

For his part, Mr. McCullough said: "Some of the landlords have been quick to adapt to the changing dynamics in the office market. And so, for the right company, for the right brand, for the high-growth companies, they're willing to give highly attractive offers."

Looking ahead, KMC sees a healthy occupier demand from expanding outsourcing and offshoring market, which is also anticipated to absorb the building completions in the coming quarters.

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