APPD Market Report Article

Manila

December 1, 2021

-1.1%

PHP 1,121

Rents
Stable

Net absorption remains negative but showed improvement

  • Net absorption in 3Q21 remained negative, but eased to -46,700, from -58,400 in 2Q21. Take-up observed in the quarter included small expansion requirements by O&O and corporate firms to accommodate employees reporting to the office.
  • The majority of the lease transactions recorded in 3Q21 were renewals coming from the O&O sector. In BGC, three O&O companies renewed their contracts with a total of 24,200 sqm of space.

No new stock in 3Q21

  • No additional office developments recorded in 3Q21 as most of the 2021 supply are set to come in 4Q21. Two office developments, set to complete by end-year, slipped to 1H22 due to several lockdowns in Metro Manila. These are 1 Proscenium by Rockwell in Makati City and Worldwide Plaza by Megaworld in BGC. These two buildings are set to add 82,000 sqm of space to the total stock.
  • Vacancy rate in 3Q21 increased to 13.1% from the recorded 12.0% in 2Q21 due to sustained moveouts from occupiers. Two POGO players with a total aggregate space of 21,000 sqm terminated their operations in the country.

Rents and capital values hold steady

  • Rents remained at PHP 1,121 per sqm per month, with landlords observed to have greater flexibility towards lease terms.
  • Similar to rental trend, average capital values remained at PHP 171,417 per sqm, buoyed by slower sales demand in the quarter.

Outlook: Office activity tempered by market uncertainty

  • Subdued lease activity is projected as majority of occupiers defer expansion plans on the back of continued uncertainty in the market and policy change. The Fiscal Incentives Review Board (FIRB) is granting the extension of the Philippine Economic Zone Authority (PEZA) WFH arrangement until March 2022 which may impact expansion activity by O&O firms.
  • Landlords may maintain flexible terms to attract and retain tenants due to weak leasing conditions and large volume of incoming stock over the next 12 months.

Note: Manila Office refers to the Makati City and Taguig City Grade A office market.

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