Office rental rates in the Makati central business district are expected to continue rising as new supply remains insufficient to meet growing demand, real estate money management and services firm Jones Lang LaSalle said. In its latest Asia Pacific Property Digest, Jones Lang LaSalle said demand for office space remains strong, driven by the expansion and entry of business process outsourcing (BPO) and information technology-enabled service firms.
‘With demand outpacing supply, rentals have moved up rapidly in the past quarters. The current asking rent in prime Grade A buildings in the Makati CBD is now at P750 to P800 per square meter, almost reaching the highest level attained in 1998. ‘Moreover, despite the current and expected huge demand of space from the BPO industry, few developers have embarked on constructing the additional supply needed,’ it added.
Taking into account that the vacancy rate has tightened to 7.09%, Jones Lang LaSalle said most Grade A buildings such as TowerOne, GT Tower, RCBC Plaza and Skyplaza enjoy an occupancy rate of almost 100%. ‘In spite of the huge demand for space from BPOs, only a handful of developers are supplying them. To date, only Megaworld Corp., Robinsons Land Corp. (RLC), Filinvest Development Corp. and SM Development Corp. have ventured into construction of new office buildings,’ it said. Jones Lang LaSalle said expatriates working for BPO firms will continue to push up rental demand for luxury condominiums.
Sales, meanwhile, will be driven by Filipinos abroad. It noted how Ayala Land, Inc. reportedly sold 13 units in One Roxas Triangle to a bulk buyer. ‘Rental demand for condominiums in the Makati CBD and its fringes are expected to remain healthy given the number of expatriates. Sales, likewise, will continue to be robust, coming from affluent Filipinos working and residing abroad.
‘Pre-selling of newly launched units is brisk with developers launching additional new towers and, at the same time, increasing prices by 3% to 5%. ‘Demand for these units come from Filipinos working abroad who plan to come back and retire in the country,’ it said. Although no new projects will be finished this year, Jones Lang LaSalle said a total of 2,723 units will be completed next year, majority of which will be in the Bonifacio Global City.
Capital values of the residential market went up by 38% year-on-year to P70,987 per square meter, although lower than the pre-selling prices of new projects between P75,000-100,000 per square meter. Investment yield has been steady at 7.5%. ‘Like in the office market, rental and capital values of the residential market have also been rising in tandem for the past quarters. The rent of a three-bedroom unit in Rockwell and Bonifacio Global City is now between P140,000 to P150,000 per month,’ the firm said.
As personal consumption continues to boost economic growth, Jones Lang LaSalle said demand for retail space remains upbeat, driven by remittances from overseas Filipino workers and improved income levels. It noted that net rent hit P16,543 per square meter during the period, inching up 2% quarter-on-quarter and 8% year-on-year. Average asking rent is now P1,100 per square meter. Capital values rose at P140,978, higher by 3.1% quarter-on-quarter and 9.1% year-on-year. Investment yield was at 11.49% during the quarter.
‘Consumer spending is expected to be buoyed up by the sustained remittances from Filipinos working abroad and the decreasing inflation rate brought about by the almost weekly reduction in fuel prices. ‘The main players have announced their expansion plans in the near term. These developments will further boost demand for retail space,’ it added. It said most malls of the three main players in Metro Manila—Ayala Land, RLC and SM Prime Holdings, Inc. — enjoy an occupancy rate of nearly 100%.