Manila: Office


Office demand in Makati CBD and Bonifacio Global City (BGC) remained positive in 4Q13 on the back of stable leasing activity. The offshoring and outsourcing (O&O) sector continued as the primary office demand driver during the quarter. Nonetheless, other industries such as information technology, consumer goods, pharmaceutical and real estate, among others, contributed to the healthy leasing demand.

Net take-up fell from 135,100 sqm in 3Q13 to 39,700 sqm in 4Q13 as only one office development completed in the quarter. Nevertheless, the average vacancy rate eased to 4.7%, down by 140 bps q-o-q. The lower overall vacancy rate was partly due to the continued absorption of available space in some recently completed developments such as Ecotower and W Fifth Avenue.

Key lease transactions in 4Q13 included an O&O company taking up 1,600 sqm in Ecotower and an IT firm leasing 1,700 sqm in W Fifth Avenue, both located in BGC. In addition, a consumer goods company pre-committed to 11,000 sqm of office space in Net Park in BGC.


Only one new office development was completed in 4Q13 – 8 Campus Place Tower 2 in McKinley Hill. This development added around 7,500 sqm to the total office stock.

Meanwhile, Avida Land Corporation, a fully-owned subsidiary of Ayala Land Inc., announced its first office project in BGC – One Park Drive. The development will comprise strata-titled office units with leasable areas between 60–150 sqm and is targeted to complete in 2017. On another note, Rockwell Land has announced that the fifth and final tower in its Proscenium mixed-use project in Makati City will be an office tower scheduled to be completed in 2018.

Asset Performance

Sustained office demand pushed average rents upwards by 1.3% q-o-q to PHP 9,887 per sqm per annum in 4Q13. Landlords of select office developments in Makati CBD and BGC increased their headline rates marginally in the quarter.

Buoyed by optimistic investor sentiment on the office property market, average capital values rose faster than rents at 5.2% q-o-q to reach PHP 98, 000 per sqm. Investment yields fell by 40 bps q-o-q in 4Q13 and registered at 10.1%. SM Investments Corporation reportedly purchased the ownership stakes of Apollo Global Management in five office developments located in BGC, at a yet undisclosed amount.

12-Month Outlook

Close to 300,000 sqm of office supply is forecast to come on stream in 2014, most of which will be located in BGC. Moving forward, this large volume of upcoming supply may push the vacancy rate upwards. However, healthy office leasing and market activity is forecast to buoy demand and sustain positive rental and capital value growth in succeeding quarters.

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