KMC Savills Metro Manila Office Briefing 1Q 2018

• In 1Q/2018, around 130,100 sq m of Grade A office space was added in Metro Manila, predominantly in BGC, the Bay Area and Quezon City. Net absorption was able to exceed new supply and it resulted in a lower vacancy rate of 3.8%. All submarkets experienced declining vacancies except for Quezon City, which increased to 10.4% of its office stock.
• Average rents in Metro Manila continues to expand and registered growth of 3.4% YoY - buoyed by the tightening conditions in most submarkets. However, the Bay Area remains to be a key outlier as average rents grew by 6.5% YoY. The tight conditions in Alabang also have accelerated rental growth to 3.8% YoY from 3.0% YoY in 4Q/2017.
• The estimated 723,200 sq m of GLA in the coming quarters of 2018 should increase the vacancy rate beyond the 5.0% mark by the end of the year. However, we believe this amount is still manageable given the market's current performance. In addition, rental growth may not be as affected due to a changing occupier mix in select submarkets such as Bay Area and Alabang.
• The offshoring and outsourcing sector is still a significant occupier of office space. However, the Philippine Offshore Gaming Operator (POGO) sector has been a rising player, as of late. We believe the emergence of the POGO sector has eased risks of a potential glut in the office market. As such, we expect occupier demand to remain healthy even with another record year of new office supply.

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Please contact Fred Rara or Michael McCullough for more information on this report.