Tight office supply could stifle firms’ expansion plans — Pronove Tai
Posted on July 26, 2017
http://www.bworldonline.com/
LOW VACANCY rates for Metro Manila office space in the first half of 2017 could stifle the activities of companies needing to expand their operations, property consultant Pronove Tai said.
“Anything below 5% is unhealthy in our industry. It does not allow our companies to move. If I need to expand I don’t have a place to expand in… I would have to wait for future buildings to be completed,” Pronove Tai Chief Executive Officer Monique Cornelio-Pronove said.
The Makati City Business District, the largest in the country, posted a vacancy level of 2%. Taguig City, which includes Bonifacio Global City, is at 3%, same as the fast-growing Bay Area, which spans the cities of Pasay and Parañaque. The Ortigas Center meanwhile registered the lowest vacancy rate at only 1%.
The low vacancy rates were not relieved by building completions during the first half of 2017, which were snapped up by tenants during construction.
“While there are new completions, these completions have actually been pre-committed. That’s why (vacancies are) very low,” Ms. Cornelio-Pronove said.
Lower vacancy rates continue to contribute to the rise in rental rates. Pronove Tai noted a 4.5% increase in rental rates in Grade A office buildings in Makati to P1,390 per square meter (sq. m.) per month. This compares to the 5.8% growth in the rental prices in Taguig, which stood at P1,125 per sq. m. per month at the end of the second quarter.
“Makati is still the most expensive. The difference between the two is around 24%,” Ms. Cornelio-Pronove said.
Despite the low vacancy rates, Pronove Tai said that 2017 will see the highest new-office supply levels in history, adding 1.2 million sq. m. of space to 2016’s office stock to end the year with 9.7 million sq. m.
The information technology-business process management industry continues to be the biggest driver of demand for office space, accounting for 44% of pre-leased space for buildings completed at the end of the January to June period.
Offshore gaming was second at 23%, which Pronove Tai observed could be stronger due to the government’s clarification of the licensing and accreditation of Philippine offshore gaming operators. Pronove Tai also emphasized that the Philippines remains the only country in Asia where offshore gaming is licensed.
“These are Filipino companies, we have Chinese companies…The ones that are targeted are mostly mainland Chinese and Koreans,” Ms. Cornelio-Pronove said, explaining the profile of office clients from the offshore gaming industry.
Flexible working space or co-working space saw strong demand in the quarter, according to Pronove Tai.
