Manila: Office


Demand continued to be healthy from offshoring and outsourcing (O&O) firms for office space in Makati CBD and Bonifacio Global City (BGC) in 3Q14. Net take-up of office space in Makati CBD and BGC was 5,600 sqm in the quarter. Other notable sources of demand included other services sector such as automotive, IT/software and marketing, as well as embassies.

Notably, many Grade ‘A’ office developments in Makati CBD and BGC continued to be fully occupied while many other buildings exhibited high occupancy levels. The continued increase in office demand is evidenced by the downward trend of vacancy from 4.1% in 2Q14 to 3.9% in 3Q14.

Key lease transactions during 3Q14 included an automotive firm and an investment firm occupying 2,100 sqm and 3,200 sqm, respectively, in Hanjin Building in BGC and V Corporate Center in Makati CBD. Numerous IT/software companies occupied relatively larger-sized office spaces in various office developments, such as a 1,800 sqm office space in Zuellig Building in Makati CBD, a 2,500 sqm office space in Panorama Tower and a 1,300 sqm office space in Net Square in BGC.


There were no completions due to construction delays of three office developments initially scheduled for completion in 3Q14.

Upcoming office developments scheduled to complete in 4Q14 include MDI Corporate Center, Orion, Twenty-Four Seven McKinley, Frabelle Business Center, Lopez Tower, McKinley Exchange Corporate Center, Techzone and Uptown Bonifacio Tower 1. The eight buildings are expected to add a consolidated 160,000 sqm of office space.

Asset Performance

Healthy office demand from multinational and local firms supported the continued upward trend of office rents and capital values.

Average rents grew by 1.9% q-o-q to PHP 10,374 per sqm per annum as several landlords raised their asking rental rates. Average capital values outpaced the growth of rents with growth of 3.8% q-o-q, reaching PHP 108,000 per sqm. Consequently, investment yields compressed further in the quarter, decreasing by 20 bps q-o-q to 9.6% in 3Q14.

12-Month Outlook

The large volume of upcoming office space may push vacancy upwards by end-2014, as well as during 2015. The O&O sector is forecast to remain one of the primary sources of office demand with support from other sectors, such IT/software, and other traditional sources. In addition, the recent credit upgrade to investment grade from the South Korean firm National Information and Credit Evaluation (NICE) Ratings, coupled with Standard and Poor’s raising its growth forecast for the Philippines may keep investment sentiment in the country positive, buoying the growth of rents and capital values.

Note: Manila Office refers to the Makati CBD and BGC Grade A office market.