KMC Savills Office Briefing 4Q 2016

KMC Savills is pleased to present the latest Office Briefing for 4Q 2016. The report provides current data on rental rates, vacancies, and supply pipeline in Metro Manila's central business districts and submarkets for the quarter.

Key Highlights:

In 2016, new supply in Metro Manila was lower than expected. Only 311,700 sq m of new office supply was completed due to several building completions pushed back to later quarters. In 4Q/2016, the capital recorded no new supply from its central business districts.

Although net absorption was lower at 345,800 sq m in 2016 in contrast to the 443,300 sq m set in 2015, it still exceeded new deliveries - indicating supply-side bottlenecks rather than lack of demand. As a result, vacancies continued to decline in all submarkets and resulted to a lower vacancy rate for Metro Manila of 2.0% by the end of 2016.

Rents in Metro Manila CBDs continued to stabilize in 4Q/2016 after growing 3.5% YoY. However, risks on rental growth still remain as the expected supply in the coming quarters, which increases occupiers' bargaining power, will weigh heavily on rentals.

Construction delays have expanded Metro Manila's pipeline in 2017 and 2018, which is almost a million sq m each year during this period. In 1Q/2017, as much as 461,800 sq m of new supply will be added because of the delayed building completions initially targeted for 2016.

In the coming quarters, we do not discount the possibility that a number of completions will be moved to later quarters, which should ease our expectations on higher vacancies in 2017. However, we still expect the office market this year to be favorable for tenants, particularly those who start the negotiations early and are flexible.

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Please contact Michael McCullough for more information on this report.