BPOs seen to push CBD office rents up
Business World, 03-13-2014
METRO Manila properties are expected to continue attracting
investors this year, with Makati and Ortigas Center office rents
seen to reach pre-financial-crisis levels on the back of business
process outsourcing (BPO) and a continuing space shortage, a real
estate services firm said yesterday.
In its Metro Manila Property Outlook 2014, released
yesterday, the KMC MAG Group said the Philippine real estate
outlook was "very positive", with the premium and Grade-A office
market expected increase rental by 7.0% in 2014. This, the firm,
said, will be due to the projected, continued growth of the BPO
"With an uncertain global economic recovery, firms will
continue cutting their balance sheets; that will result in an
increase of head count in outsourcing destinations, leading to
strong demand in Metro Manila," the report read.
"CBD (central business district) rents are likely to reach
pre-financial-crisis levels in Makati and Ortigas," it continued,
noting that those in Bonifacio Global City (BGC), Taguig, did so
KMC MAG also noted Manila's rise in the annual Tholons
ranking of the world's top 100 outsourcing destinations; the
capital overtook Mumbai and placed second this year.
"Manila is still positioned as a top outsourcing destination
over India, thanks to the country's (Philippines) young, educated
English-speaking labor force; affordable labor costs; and taxation
benefits for investors via PEZA (Philippine Economic Zone
Authority) accreditation," the property firm said.
However, KMC MAG also described a shortage "currently
occurring in the market". The firm expects the BPO industry to
drive the annual office take-up to 400,000 square meters "in the
coming years", but only an additional 320,000 sq. m. of new office
space is seen coming this year.
The current office vacancy rate is 4.1%, according to the
report, and "there is no space available to facilitate the shortage
created by the demand".
The firm also cited this shortage for the rental increase of
the past years and noted that prime rents rose to 7.2% last
As for the residential market, KMC MAG said value
appreciation was "justified" and that "the country still has a lot
of potential in the long run, as the urbanization will
The firm expects investors and expatriates to drive demand
for high-end apartments while the middle class and its increased
purchasing power seeks subdivisions, townhouses, and
"Although short-term luxurious residential space investors
might experience some pricing pressure, the fact that Manila still
has a relatively low price level within the region attracts
investors and boosts the currently high figures of sales and
take-up," the report read.
KMC MAG also saw foreign investors looking for Philippine
joint venture partners for property developments. It cited the
$405-million deal last year between Ayala Land, Inc. and the
Mitsubishi group to develop a 3.6-hectare mixed-use site in the