THE METRO MANILA office net take-up in the first half of 2024 has already surpassed the full-year performance of 2023, buoyed by return-to-office mandates and office expansion, according to global real estate services firm Santos Knight Frank.
The office sector net absorption of 281,000 square meters (sq.m.) in the first half of 2024 was approximately 125% higher than the full-year take-up of 125,000 sq.m. in 2023.
“Return-to-office mandates and office expansions, supported by offshoring operations, have led to a doubling of demand in the office market,” Santos Knight Frank Chairman and Chief Executive Officer Rick Santos said during a press briefing on Tuesday.
Information technology and business process management sectors and the government led the office transactions during the period.
Occupier Services & Commercial Agency Senior Director Morgan McGilvray reported that Metro Manila had an average rental rate of P1,022, a vacancy rate contracted to 18.9%, and an existing supply of 8.5 million sq.m. in the first half of 2024.
He noted that as the vacancy rate approaches 20%, rental rates tend to soften.
Makati City had the highest asking rent at P1,256, with a 20.7% vacancy rate and a supply of 1.5 million sq.m. during the first half.
Taguig followed with an asking rent of P1,250, a 14.5% vacancy rate, and a supply of 2.3 million sq.m.
“Makati still has the biggest section of prime-grade buildings, and we’re also seeing some of the higher rents for new buildings in Makati that are generally close to EDSA and along Ayala Ave,” Mr. McGilvray said.
Alabang had an average rent of P788, with a 23.8% vacancy rate and 500,000 sq.m. of supply during the period. Quezon City recorded a rent of P823, with a 27.8% vacancy rate and a supply of 1.4 million sq.m.
Ortigas had an average rent of P820, with a 22% vacancy rate and a supply of 1.6 million sq.m.
Meanwhile, the Bay Area had a rent of P972, with a 23.2% vacancy rate and a supply of 1.2 million sq.m.
“The Metro Manila office market remains tenant-favorable, with rents exhibiting marginal decline,” he said.
Mr. McGilvray said the year-to-date completion of around 127,000 sq.m. of office space brings the total Metro Manila supply to 8.5 million sq.m.
There will be 299,000 sq.m. of new office projects completed within the second half of the year, with another 360,000 sq.m. expected from 2025 to 2027.
The firm expects the Philippines to remain one of the most competitive offshoring hubs in the Asia-Pacific (APAC), driven by a young talent pool, affordable operating costs, and a robust supply of office spaces, Mr. Santos said.
In Knight Frank’s five-point comparison of APAC offshoring hubs, the Philippines stands out as the most well-rounded, topping in terms of workforce demographics and scoring well in business costs, skills, growth dynamics, and commercial real estate value.
Mr. McGilvray added that Metro Manila was the third most affordable location in Asia Pacific, with downward rental adjustments in older prime offices bringing down the average prime office occupancy cost to $27.90 per square foot per year. — Aubrey Rose A. Inosante
