The Metro Manila office market has seen an increase in vacancies after the completion of 182,900 sq m of additional office space. In KMC Savills' 3Q/2018 Office Briefing, the vacancy rate is pegged at 3.7% of the total stock and is expected to balloon to 5.0% by yearend.
Metro Manila expects a total of 332,200 sq m of office space in 4Q/2018. Bonifacio Global City still carries the bulk of the new supply at 81,200 sq m in 3Q/2018, closely followed by the newly-revived Ortigas Center with 43,300 sq m of additional space.
Robust performance in Makati, Ortigas
The premier financial district, Makati CBD has performed exemplary this quarter. Vacancies in the CBD dropped despite significant office completions from Ayala North Exchange's first tower. The NEX Tower is expected to add another 34,300 sq m in the last quarter of the year, which may increase the CBD's vacancy rate to 2.5%.
Ortigas Center is also quickly recovering with a promising office pipeline. As it seeks to introduce 566,500 sq m of offices, the vacancy rate is expected to climb to 18.5% by 2020. This rise in vacancies will most likely depress rental rates in the coming quarters. However, this will easily be remedied by the improving quality of office stock in Ortigas as it looks to the completion of Podium West Tower, GLAS Tower, Jollibee Tower, and Unioil Tower.
BGC on PEZA applications slowdown
As the top contributor of new office stock, BGC experienced a rise in vacancies as occupier demand was not able to keep up with the completions during the period. The submarket may have experienced a strain in absorption after it was majorly affected by the slow approvals of PEZA applications for certain buildings.
However, BGC's supply pipeline continues to be exemplary as it seeks to add 425,500 sq m by 2021. This will push the vacancies upward close to the 10% mark in the said year.
Grade A Office Spaces to rise in 2019
KMC Savills Research Manager Fredrick Rara estimates a rise in Grade A office stock in 2019. "An additional 300,250 Grade A offices will be completed in the first quarter of next year," Rara explained. This will give Metro Manila a grand total of 6,674,837 sq m of Grade A Office spaces.
BGC still carries the most Grade A office spaces in Metro Manila with 1,722,450 sq m. It is closely followed by the Makati CBD with 1,154, 911 sq m recorded in the last quarter of 2018. Rara adds that "Ortigas and the Bay Area is also improving their Grade A office portfolio as more businesses look to locate or expand their operations in these CBDs."
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