The office property market is on track to another record-setting year despite a challenging period for the information technology business process management (IT-BPM) and the Philippine offshore gaming operation (POGO) segments, according to Pronove Tai International Property Consultants
For the months of July, August, and September, 15 new buildings were completed adding 402,000 square meters (sq.m.) to Metro Manila’s office stock, noted Pronove Tai said
“This brought the all-grade office stock to 11.4 million sq.m. The two districts of Quezon City and Taguig City accounted for 82 percent of the total supply for the quarter, adding approximately 230,000 sq.m., and 101,000 sq.m., respectively,” said Monique Pronove, president of Pronove Tai.
“This has been Quezon City’s highest recorded supply in a quarter. We saw a 10 percent growth year on year in Quezon City coming from 9 buildings. This alone accounted for 57 percent of the new supply in Metro Manila this quarter,” she added.
Pronove noted Makati, Muntinlupa and the Bay Area had only one to two buildings completed while Ortigas Center and Mandaluyong has no completions during the third quarter.
Pronove Tai, however, noted that despite the strong supply delivery, vacancy level dipped to 5 percent from 6 percent the previous quarter and is looking to “maintain a healthy 4 to 5 percent rate by the end of 2019.”
“The vacancy was still tight in the Bay Area (Pasay and Paranaque) as well as Makati City at a staggering 0.4 percent and 2 percent, respectively. Only three districts – Ortigas Center, Muntinlupa City and Taguig City registered a healthy vacancy of 5-6 percent this quarter,” she said.
“Though the office vacancy decreased from 12 percent in Q2 (second quarter) to 11 percent in Q3 (third quarter), Quezon City still had the highest vacancy in Metro Manila at over roughly 150,000 sq.m.. This could be attributed to the slow leasing absorption for its new building completions in the past two years as it only recently opened its market to POGO occupiers,” she added.
Pronove Tai tracked a total of about 305,000 sq.m., of actual leasing transactions from July to September that include leasing and pre-leasing transactions. Of this demand, traditional offices accounted for 40 percent or 122,000 sq.m., followed by IT-BPM at 32 percent, offshore gaming (POGO) at 23 percent, and Flexi-workspaces at 5 percent.
The IT-BPM and POGO segments however faces demand restrictions with the issuance of Administrative Order 18 by the Office of the President in June, which imposed a moratorium on the issuance of Philippine Economic Zones Authority (PEZA) accreditations in Metro Manila, affecting the ITBPM. This was part of the government’s decentralization plan to push stronger economic activity in suburban areas.
In August, Philippine Amusement and Gaming Corp. (PAGCOR), which regulates POGO operations, meanwhile announced that it will no longer grant licensing permits to new POGO applicants until the end of the year.
“Amidst these challenges, the office leasing market remained strong and we project it to reach 1.2 million sq.m., by the end of December 2019. This would breach last year’s record performance by 9 percent,” however said Pronove.
Pronove said the third quarter proved to be “an exceptionally strong period” for traditional firms with a significant 61 percent growth from only 76,000 sq.m., in tranasction last year.
“The top five growing industries were banking and finance, food and beverages, insurance, government offices, and real estate,” she said, noting that Makati accounted for the most leasing transactions at 28 percent.
“The Bay Area accounted for 20 percent characterized mostly by POGOs and then Quezon City at 17 percent with ITBPM accounting for most of the leasing transactions there this quarter,” she added.