Under-a-year office renting a growth business, says property consultant

Interaksyon.com by Krista Angela M. Montealegre, 08-29-2014

MANILA - Real estate agency KMC Mag Group sees growth in the serviced office market, riding on the strength of the business process outsourcing (BPO) sector.

In a briefing on Thursday, KMC Mag Group associate director Gerold Fernando said serviced offices are gaining popularity in the country's central business districts (CBDs) and outside Metro Manila because of the low-risk, low-capital nature of the space.

"Serviced office is a new product in the real estate market. It's basically plug and play. It came in the market because of strong demand and it is attractive for new entrants who want to test the market," Fernando said.

Serviced offices are ready for immediate occupancy because they are fully fitted and furnished with a fixed cost that factors in all possible expenses, including utilities and Internet use. Unlike a normal lease contract that lasts for at least a year, regular serviced office contracts can be as short as three months.

"The serviced office market is the way to go," Fernando said, noting that Makati is home to about 12 serviced office providers.

In the second quarter, Bonifacio Global City commanded the highest average monthly seat rate among the CBDs at P20,350 per square, followed by Makati at P19,250 and Ortigas at P13,200.

Fernando said BPO and knowledge process outsourcing (KPO) operations as well as small and medium enterprises (SMEs) are driving the growth in the serviced office market. Demand for this concept is expected to be sustained as prime office supply in CBDs remains low until 2016.

"Provinces such as Bulacan, Pampanga, Cavite and Laguna have also shown that they could attract foreign investment by providing the spaces for new enterprises to flourish. We hope that more local governments would be inspired by their example and invest in infrastructure, talent and even in crafting business-friendly policies," said KMC Mag Group managing director Michael McCullough.

The IT-BPO industry will continue to lead the growth in the office leasing market with take-up expected to reach 280,000 square meters this year.

Favorable demographics, strong macroeconomic figures and the government's commitment to undertake reforms bode well for the real estate sector, which is expected to continue its positive growth trajectory in the next few years, McCullough said.