Manila: Office

  • Stable leasing activity supported by the O&O sector
  • Healthy leasing demand drives rental growth
  • Investment yields slightly decrease as capital value growth outpaces rents


Net take-up of office space within the Makati CBD and Bonifacio Global City (BGC) was recorded at 31,100 sqm in 2Q14. Stable demand from various multinational and local firms, particularly offshoring and outsourcing (O&O) firms, supported the healthy take-up of office space. Notable sources of demand in the quarter included the financial services, logistics, as well as IT/software sectors. Healthy office demand was evidenced by the continued decrease in the overall vacancy rate, from 4.4% in 1Q14 to 4.1% in 2Q14.

Many Grade ‘A’ office buildings within the Makati CBD and BGC were fully occupied, while other buildings exhibited high occupancy levels. Further, recently completed developments Venice Corporate Tower and Panorama Tower were observed to have healthy pre-commitment levels. On average, the pre-commitment level in both office buildings was recorded at 60% upon completion.

Key lease transactions in 2Q14 included a financial services firm and an IT/software firm occupying 1,700 sqm and 2,000 sqm, respectively, in W Fifth Avenue. Another significant lease transaction was a logistics company leasing 1,100 sqm of office space in the V Corporate Center.


Two office developments completed in 2Q14, namely Venice Corporate Tower in McKinley Hill and Panorama Tower in BGC, which added 8,000 and 18,900 sqm, respectively, to the total stock of office space.

Upcoming office developments slated to complete in 3Q14 include Orion, Twenty-Four Seven McKinley and the MDI Building. The three buildings are located in BGC and are expected to add a consolidated 30,100 sqm of office space to the market.

Asset Performance

Robust office demand, coupled with continued healthy leasing activity, supported the positive performance of office rents and capital values.

Average rents increased by 1.5% q-o-q to PHP 10,179 per sqm per annum in 2Q14. Meanwhile, average capital values continued to outpace the growth of rents, exhibiting a 3% q-o-q growth to reach PHP 104,064 per sqm in 2Q14. Consequently, investment yields posted a slight of 10 bps q-o-q to 9.8%.

12-Month Outlook

Nine office developments with a consolidated total area of 187,100 sqm are slated to complete in the second half of 2014. Given the large volume of incoming office space, vacancy levels may be pushed upwards by end-2014, as well as in early 2015.

Robust demand for office space from various industries, such as financial services and logistics, coupled with rising demand from the knowledge process outsourcing sector, a sub-sector under the O&O sector, are likely to support the continued growth of the local office property market. Further, the positive economic outlook and the recent credit upgrade by Standard and Poor’s may provide support to the positive trend of both rents and capital values for the rest of the year.

Note: Manila Office refers to the Makati CBD and Bonifacio Global City Grade A office market.