Continuous pick-up in office leasing signals recovery after 18.2% vacancy rate

Continuous pick-up in office leasing this year signals a slight recovery after posting an 18.2% vacancy rate in 4Q/2021. 

In its latest property market report, KMC Research said that the office market has posted record-high numbers during the final quarter of 2021, still a subsequent effect of the pandemic. Makati CBD alone registered an 18.1% vacancy rate after 59,800 sq m of office space was vacated as of year-end. This was the highest negative net take-up in the capital.  
 
Meanwhile, neighboring business district Bonifacio Global City is pegged to stay above the 10% threshold factored by the scheduled completion of pre-committed developments in the submarket. 
 
Average rental rates declined by another 1.8 YoY in 4Q/2021, pushing landlords to continue offering concessions such as rental abatements and longer fit-out periods. 
 
Supply outpacing Demand 
 
KMC Research reported that new supply across Metro Manila’s main submarkets is forecasted to reach almost 850,000 sq m, the majority coming from Ortigas Center and Bay Area. Despite this, Ortigas Center was the outperformer this quarter, recording the highest net take-up of 117,400 sq m thanks to its improving stock and affordability. 

As companies postpone finalizing return-to-office plans indefinitely and remote work becomes mainstream, an influx of new supply will keep vacancies high and may breach the 20% threshold in the next few quarters. More businesses adopt the Hub and Spoke office model, which may lead to lease pre-termination and nonrenewal. 
 
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Jeanne Cayabyab at (+63) 917-877-3214. For office leasing inquiries, contact (+63) 2-8403-5519 or email [email protected]