KMC Savills is pleased to present the latest Office Briefing for 3Q 2017. The report provides current data on rental rates, vacancies, and supply pipeline in Metro Manila's central business districts and submarkets for the previous quarter.
- New supply declined to 170,400 sq m in 3Q/2017, but net absorption kept its pace with 147,600 sq m. The overall vacancy rate marginally rose to 4.5% during the quarter from 4.2% in 2Q/2017. Market conditions remained tight in most submarkets with the exception of Quezon City.
- The Bay Area accounted for more than a third of the new supply followed by BGC and Quezon City. However, leasing activity during the quarter has mostly concentrated in the Bay Area with net absorption closely tracking new stock. This is mainly due to a more diversified collection of occupiers, such as the emerging offshore gaming segment and certain sectors of government.
- Rents have regained footing in 3Q/2017 as vacancies remained tight amid minimal additions to stock. To date, market performance is still ahead of our forecast, and we expect the office market to end the year with manageable vacancies. However, we are still of the view that landlords should become more accommodating in the coming months with the massive influx of supply until 2020.
- Lastly, the delays in granting PEZA certification for certain office buildings have become concerning. We have observed slower leasing activity in buildings without PEZA certification, and we expect the delays to affect future market performance. Again, we may expect landlords to be more flexible in accommodating the sensitive needs of expanding occupiers, but this may only slow the rise of vacancies if the delays persist.