Office space market rebounds in fourth quarter

The Philippine office space market rebounded in the fourth quarter of 2022 from the same period last year, according to a rea estate consultancy company.

The Lobien Realty Group (LRG) said that in the total supply of office property reached 757,501 square meters in Metro Manila in the fourth quarter.  These included 598,518 sqm of space that were available for lease.

"This means that approximately 21% of office property are leased at the prevailing average rent of P1,150 per sqm across all Metro Manila business districts. These figures are a substantial improvement compared to the 4^th quarter of 2021 when only 11% of total office property supply was leased in Metro Manila," it said.

Rent and land values were highest in Makati and Taguig with average rental range of P800 to P1900/SQM and land valued in the P400,000 to P1,000,000/SQM range.

In Pasig average rental range is P500 to P1100/SQM and land value ranges from P280,000 to P350,000/SQM. Mandaluyong’s rental range is P600 to P950/SQM and land value ranges from P120,000 to P230,000/SQM.

Quezon City has an average rental range of P650 to 1,200/SQM and land value ranges from P170,000 to P230,000. Alabang’s average office property rental range is P700 to P975/SQM while land value ranges from P250,000 to P400,000/SQM. Bay City’s average rental range is P1,000 to P1,600/SQM and land value ranges from P300,000 to P500,000/SQM.

LRG said as of the first half of 2022, office demand in Metro Manila was driven by Business Process Outsourcing (BPO) comprising 45% percent  Online Gaming accounts for 7%, and Other Industries making up for the remaining 48% of office property demand.

The significant demand of BPO companies for office spaces in the country, particularly Metro Manila, is in sync with the findings of the IT and Business Process Association of the Philippines (IBPAP) which ranked PH #1 in the world in voice BPO and #2 in non- voice, complex services.

Outside Metro Manila,  IBPAP has identified 5 areas that have emerged as centers of excellence in the country when it comes to the office property market: Metro Cebu, Metro Clark, Metro Bacolod, Davao City, and Iloilo City.

IBPAP also named 10 additional cities that are classified as New Wave Cities, or cities that will be the alternative investment hubs outside Metro Manila: Baguio City, Cagayan De Oro City, Dagupan City, Dasmarinas City, Dumaguete City, Lipa City, Malolos City, Naga City, Sta. Rosa City, and Taytay Rizal. These Cities promote country-wide improvement, create job opportunities and economic advancement in their region.

LRG’s office market supply analysis across all provincial business districts shows that as of the 4^th quarter of 2022, total supply stands at 306,624 SQM, available supply is 251,145 SQM, total percentage of leased supply is 18%, and average rent is P630/SQM. LRG estimates that provincial office supply currently in the pipeline for the period 2022 – 2026 to be around 540,000 SQM. LRG also notes that the rise of innovative township developments will continue to attract investments and locators. 60% of these developments are located outside Metro Manila and their popularity should bring more businesses to provincial areas.

LRG is optimistic that the economic recovery of the Philippines in the new normal era will continue and hopes that 2023 will set a new standard for the continuing recovery and growth of the office property market and the entire real estate industry.