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Makati City Business District

Metro Manila's office supply to reach 14 million sqm

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Property research firm Colliers expects the total office space supply in Metro Manila to increase by 3 million square meters over the next three years to hit 14.3 million sqm by 2021.

This will represent a 31-percent expansion from 10.9 million sqm of leasable office stock in the National Capital Region as of end-2018.

“About 54 percent of the new supply from 2019 to 2021 is likely to be in Ortigas Center, Fort Bonifacio and the Bay Area as developers respond to rising demand from non-outsourcing and offshore gaming firms as well as companies transferring to newer buildings,” Colliers said.

Colliers sees sustained office completions in Metro Manila from 2019 to 2021.

“ With the implementation of an administrative order halting the approval of new ecozones in Metro Manila, we expect the national government to expedite approval of Peza applications in second and third tier cities to support the government’s efforts in spurring economic opportunities outside of the country’s capital,” it said.

Colliers said that despite the completion of 190,000 sqm in the second quarter of 2019, Metro Manila recorded a lower vacancy of 4.9 percent, compared to 5.4 percent in the first quarter following substantial absorption of office space in Quezon City and Ortigas CBD and its fringes. Colliers expects an annual vacancy of 6.1 percent from 2019 to 2021. This is equivalent to an annual supply of 1.08 million sqm and yearly net absorption of about 1 million sqm.

New supply in the Bay Area, Ortigas Center, and Quezon City should be tempered by demand from offshore gaming and traditional or non-outsourcing occupants, it said.

The demand from offshore gaming firms has been relentless with transactions reaching 274,000 sqm in the first half. Deals were closed in Alabang, Bay Area, Quezon City, Ortigas, Makati CBD and its fringes in the second quarter. Colliers sees take up from these firms breaching 300,000 sqm this year especially with new business hubs being more accommodating to offshore gaming operations.

Meanwhile, Real Estate Investment Trusts (REIT) in the Philippines is on the rise, as more companies look to raise capital to fund and promote real estate investments among the public, according to Lamudi.

Joey Bondoc, senior research manager at Colliers International Philippines, said that REITs empower the individual investor by democratizing the property market and allowing investors to own a piece of property even when they don’t have the means to buy the entire building. “They just have to buy into a REIT company because the REIT company is obliged by law to pay 90 percent of net income as dividends — and that goes to the investor,” Bondoc said.

A REIT is also seen as a less risky form of investment and less susceptible to speculation.

Hannah Yulo, chief investment officer of DoubleDragon Properties Corp., said that REIT is a great opportunity for equity investors to diversity their local and global portfolios.

“REITs answer investors’ demand for a tax-efficient and yield-driven vehicle as they provide greater liquidity and more stable return,” Yulo said.

More offshore gaming, multinational, outsourcing companies, and flexible working space operators are expected to sustain the huge demand for office space. The government’s infrastructure push also presents a big opportunity for developers to transfer their assets into REIT.

Colliers said REITs benefit developers through generating funding that can be used to expand the real estate sector in key cities outside Metro Manila such as Cebu, Bacolod, Iloilo, Davao, Cavite, and Clark in Pampanga.

This will be crucial in light of the government’s order to stop the processing of economic zone applications in Manila. Colliers said that boosting economic activities outside the country’s capital will make up for any decline in outsourcing and technology-related investments in Metro Manila.

Colliers noted that harnessing the full potential of the REITs will make the Philippines at par with other Southeast Asian markets like Indonesia, Malaysia, and Singapore, which already have listed REITs.

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