KMC Savills Metro Manila Office Briefing 2Q 2018

KMC Savills is pleased to present the latest Office Briefing for 2Q 2018. 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.

Key Highlights:

• The overall vacancy rate in Metro Manila dropped to 3.0% in 2Q/2018 from the previous quarter's 3.8%. Net absorption of around 198,200 sq m outpaced the 164,300 sq m of new office completions during the same quarter. Quezon City was able to significantly reduce its vacancies to 8.0% of its current stock due to the recovery of certain outliers in the submarket.  
• As such, the tight market conditions have caused rental growth to accelerate by 4.4% YoY during the quarter. Much of the acceleration was observed in the Bay Area where it experienced rental growth of 11.5% YoY during 2Q/2018. Alabang also had above-average growth of 5.0% YoY as Philippine Offshore Gaming Operator (POGO) tenants settle into the fledgling CBD.  
• In the first half of 2018, as much as 294,300 sq m of GLA was introduced in the market. So far, robust occupier demand has been sustained and has kept vacancy rates low in most submarkets. However, the second half of the year is expected to bring 581,900 sq m of new Grade A office space into the Metro Manila market. Based on the historical trend of office completions, the incoming new supply is still significantly challenging. 
• The POGO sector has taken a foothold in certain submarkets, such as Alabang and the Makati Fringe. However, the offshore and outsourcing (O&O) market has been resilient in the Bay Area despite the dominance of the POGO sector. With the impressive performance of both sectors in 2Q/2018, we have revised our 2018 year-end vacancy rate forecast downwards to 6.7%.

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