KMC Savills Metro Manila Office Briefing 4Q 2018

KMC Savills is pleased to present the latest Office Briefing for 4Q 2018. The report provides current data on rental rates, vacancies, and supply pipeline in Metro Manila's central business districts and submarkets for the previous quarter.

Key Highlights:

• Metro Manila saw 746,900 sq m of new Grade A office completions in 2018 - roughly the same amount recorded in 2017. Net absorption was significantly higher last year at 701,100 sq m compared to 615,200 sq m recorded in 2017. As such, overall vacancies were kept at just 4.8% of stock and is slightly higher than the 4.5% vacancy rate the previous year.
• Rents in the capital have accelerated further, hitting 5.0% YoY in 4Q/2018. The tight conditions coupled with contract expirations have propped higher bids in Makati CBD while subsequently pushing up rents in the premier district. In addition, rents in BGC are still on the uptrend as the strong outsourcing and offshoring (O&O) demand raised rentals further during the quarter.
• Quezon City received more than half of new supply in 4Q/2018 which raised its vacancy rate to a ten-year high of 16.4% as occupier demand remained sluggish. This has dragged Metro Manila's performance during the quarter and may pull the office market further in the coming quarters. It has been a key outlier since 2016, failing to follow other submarkets such as the Bay Area and Alabang which have reversed its course since then.
• In the coming quarters, our eyes are on Ortigas Center which is expected to see 206,000 sq m of new Grade A office stock. We anticipate that occupier demand in the CBD will struggle with the influx of office supply as it will consequently raise total vacancies. However, we also forecast a significant acceleration in rents in Ortigas Center as new supply improves the quality of its overall stock.

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