Office space demand on the rise in Metro Manila

The demand is quickly catching up with supply as office space requirements are showing no signs of
a slowdown, according to CBRE Philippines.
CBRE noted that prime and grade A offices in major business districts posted more than 96% occupancy rate on the average in the first quarter of 2012.
“While demand continues to grow primarily due to the sustained expansion of the outsourcing and off-shoring industry, new supply remained scarce.”
The limited turnover did little to ease the tight supply situation in the market. Supply pressures resulted to the further increase in lease rates of BPO offices,CBRE said.
In Makati, the average vacancy rate declined from 4.47% in the fourth quarter of 2011 to 3.43% in the first quarter of 2012.
CBRE said the consistent growth in demand for traditional offices by multinational and local companies coupled with the lack of new completions is sustaining the supply pressures in the business district.
The average lease rate increased from P818 per square meter per month in the fourth quarter of 2011 to P831 per square meter per month in the first quarter of the year.
CBRE expects the demand for office space in Makati Central business district to be sustained as flight to quality increases.
Additional supply is expected for turnover in the second half of the year to augment the supply of both traditional and business process outsourcing (BPO) offices.
The first building set for completion during the year is the Zuellig Building, which is the first prime office building to
be pre-certified gold under the LEED core and shell program. It will be operational in the third quarter and will provide 33,000 square meters of new leasable space.
It is the first of its kind in the Makati central business districts and reflects the trend in the quality of prime buildings that will be constructed in the future.
CBRE said the average vacancy rate in Fort Bonifacio went down to 1.74% from 4.16% in the previous quarter with the higher absorption of offices turned over in the second half of 2011.
Office buildings in the business district continue to benefit from the stable growth in the requirements of outsourcing and offshoring companies.
The average lease rate inched up by 8.03% from P697 per square meter per month in the fourth quarter of 2011 to P753 per square meter per month in the first quarter of 2012.
Several buildings are up for completion in the succeeding months which will improve the supply situation in the business district.
CBRE said the vacancy rate however is not anticipated to rise drastically given the high pre-commitment levels of upcoming offices. The most notable among the pre-leasing activities is the expansion of operations of Wells Fargo & Co. in McKinley Hill.
A new business support center will be set up in the business district which will be part of the company’s non-core business activities in the country.
The stronger demand for traditional offices in the Ortigas Center has brought down the average vacancy rate to 3.72% from the previous quarter’s 5.6%.
The average lease rate increased by 4.1% from P537 per square meter per month in the previous quarter to P559 per square meter per month.
CBRE said the upcoming offices in the business district will cater to BPO companies with additional supply
expected for turnover starting in the fourth quarter.