Record take-up for premium office spaces in 2015

Makati still on top; Bay Area, Quezon City catching up 

MANILA, Philippines - The take-up of premium grade office spaces in Metro Manila reached a record high in 2015, with the Makati central business district still commanding the highest prices, real estate services firm KMC MAG Group said in a report.

While Makati CBD remains on top of the heap, the Bay Area and Quezon City are shaping up as choice locations for business outsourcing firms due to the large labor pool in the neighboring province of Bulacan, it added.  

KMC MAG Group director Rosario Carbonell said the business processing outsourcing (BPO) industry drove the take-up of premium grade office spaces to a record 435,000 square meters (sqm) in 2015. This year, a similar level of take-up is expected.

Assuming the Philippines maintains its current level of economic growth, she said other sectors – financial services, retail, legal – can create additional demand of 20,000 - 100,000 sqm.

Due to the high demand for office spaces in the area, Makati CBD still fetches the highest rental rate in Metro Manila — at P980.8 per sqm monthly — compared to office spaces in Bonifacio Global City (BGC) (P873.2 per sqm), Ortigas CBD (P623.3 per sqm), Alabang (P605.3 per sqm), Bay Area (P674.7 per sqm), and Quezon City (P710.7 per sqm).

Carbonell noted, though, that more developers are building office spaces in BGC and in the emerging business districts of Bay Area, Quezon City and Alabang.

 “Developers still believe in the saying ‘build and they will come.’ Manila is still one of the cities in Asia that is aggressively building office spaces. Major developers continue to build to supply high demand,” she said.

 Carbonell noted in 2015 alone, BPO companies Accenture, HTL, Tata Consulting and others expanded their operations, taking up 400,000 sqm of premium grade office spaces.

 As demand for Makati nearly outpaces supply, developers are extending their reach to other business districts.

 “What Makati cannot accommodate, will go to BGC, in Ortigas also, there is high demand and low supply so developers are going to Quezon City,” said Carbonell.

 This is because of the deep pool of available labor that can be gained cheap up in the northern end of Metro Manila.   

 “For BPO companies to expand, they need to consider not only the cost of office space but the cost of labor as well. BPOs are looking outside of Metro Manila where the cost of labor is smaller. Alabang is competing with Quezon City and Bay Area that both have a large labor pool,” she said.

 Carbonnel said as developers continue to expand their reach in various CBDs, rental rates would soon level as new supply would temporarily shoot up the vacancy rates in some districts in the next three years or so.

 KMC MAG Group reported that major developers are expected to pour in a total P369 billion in capital expenditures this year, also a record high to support high demand.

 These developers include Ayala Land, SM Prime, Megaworld, Vista Land, Filinvest, DMCI Homes, Robinsons Land and Federal Land.