KMC Savills is pleased to present the latest Office Briefing for 4Q 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.
- In 2017, Metro Manila saw the highest number of completions to date at around 761,100 sqm of gross leasable area (GLA). Despite the significant additions, the market exceeded expectations as net absorption surged to 629,500 sqm and brought vacancies to just 4.5% of total stock by the end of the year.
- Although rental growth spiked in the Bay Area in 4Q/2017, average rents in Metro Manila grew at a more moderate rate of 3.5% YoY. Rental growth in BGC was subpar in 4Q/2017 which we believe is a result of changing market dynamics- rising vacancies coupled with a substantial office pipeline. In addition, the contrasting rental performance between submarkets highlights the locational preference of the Philippine offshore gaming operator (POGO) sector.
- Furthermore, 2018 should be another challenging year for the office market as another 805,000 sq m of GLA is estimated to be online. More than a third of the pipeline will be in BGC while Quezon City will welcome close to a quarter of Metro Manila's new supply. Quezon City may yet again drag the overall market performance this year, but this should be mitigated by other submarkets with impressive absorption rates.
- In the coming quarters, we should expect mixed results from the various submarkets in Metro Manila due to the diversifying pool of occupiers. As such, certain occupiers may be faced with varying degrees of difficulty securing affordable rates in certain areas, such as the Bay Area. On the other hand, occupier demand is still seen to be intact despite another record year of office completions in the market.