8/3/2019 2011 3Q Manila Office Market Beat
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MANILA OFFICE REPORT
MANILA OFFICE REPORT 3Q111
3Q11ECONOMY
The Philippine domestic economy decelerated to 3.4% in the
second quarter of2011 compared to the 8.9% Gross Domestic Product
(GDP) growth that wasrecorded in the same period last year. Growth
was driven by the strongperformance of the agriculture sector, as
well as the modest expansion of theservices sector, primarily
financial intermediation, real estate, renting and
businessactivities, and other services subsector. The Philippine
Peso strengthened againstthe US Dollar to average P43.29 from
January to August this year. Annual Inflationrate averaged 4.3% in
the eight months to August, well inside the governments fullyear
target of 3-5%. The results of the July 2011 Labor Force Survey
(LFS)showed that Employment rate remained high at 92.9% while the
Unemploymentrate was estimated at 7.1%. Export earnings in the
first six months of the year
amounted to $24.757 billion while Imports was recorded at
$30.501 billion. Thelatest Business Expectations Survey of the
Bangko Sentral ng Pilipinas (BSP)shows improved business outlook
for the third and fourth quarter of 2011.
OVERVIEW
The Philippine Real Estate Market continues positively in the
third quarter of 2011.The healthy outlook and demand from the
Business Process Outsourcing(BPO)/Call Center industry remains,
driving the growth of office leasing operations.Developers continue
shoring up projects to provide this industry, as well as
otherindustries, with new space. However, project completions
remain at a slow pace.Only a fraction of new space expected to be
finished this quarter was delivered,while the remaining moved their
target completions. While there are projects withinMetro Manila
that will offer fresh space for office lease, areas outside Metro
Manilaare also being developed to host prospective tenants, mainly
BPOs. Developmentof offices are now being brought to where the
human resources is.Most landlords continues to increase their lease
rates. The view that 2011 will seethe market gaining gradual
increase as demand peaks and supply graduallydiminish is still
upheld given the current situation. Office market is anticipated to
beneutral later this year. Investor sentiment remains positive even
as a new globaleconomic crisis is feared to occur. Low lease rates
may still be enjoyed in areaswithout new spaces such as Manila
City. Vacancy rates continue to decline. MakatiCBDs prime rates is
still averaged at Php850/sqm/mo, while vacancy rate droppedto
8.30%.The local Real Estate Investment Trust (REIT) continues to
have issues regardingregulation and governance. REIT is expected to
inject more capital into the market.However, developers, initially
enthusiastic of the investment opportunity offered byREIT, are now
hesitant in expanding to the REIT market citing strict
andunworkable rules.Active campaign for green building projects are
also undertaken by different
sectors. Most developers are now applying said concept to new
projects.
OUTLOOK
The market is expected to remain positive and become neutral by
the last quarterof 2011. The BPO/Call Center industry is expected
to continue to drive the growthof office leasing operations until
the year ends and even beyond. Further increasein lease rates is
expected. Inflationary pressures as a result of the rising oil
prices,the European financial crisis, and the US economic issues
will likely affect themarket in the short-run, but this is expected
to be mitigated by the initiatives andreforms implemented by the
combined effort of the private sector and thegovernment towards
economic growth. A dialogue between the government andthe private
sector regarding REITs will hopefully settle issues and result in
puttingthe market at par with international competition.
ECONOMIC INDICATORS
2009 2010 20
GDP Growth 1.13% 7.3% 7
CPI Growth 3.4% 3.8% 3.5-5
UnemploymentRate
7.5% 7.3% 7
Employment Rate 92.5% 92.7% 92
Source: NSCB, NSO, NEDA, CFEI
BEAT ON THE STREET
Currently, the (REIT) regulations are tostringent. But then
again, Im hopeful commosense will prevail and this will be
tremendous step forward for the Philippinegiven the growing
population and growinurbanization. Simon Treacy, group chiexecutive
at MGPA, quoted from BusinessWorld article dated 21 Septemb2011
GRADE A RENTAL VS. VACANCY
RATES
MARKET FORECAST
ABSORPTON: Low absorption rates lingersas most spaces taken up
are replaced bynewly constructed spaces and majorexpansions and new
leases are still deliberatedupon by both landlords and tenants.
CONSTRUCTION: A slow pace of projectcompletions persists,
delaying commencementof the construction of other projects in
thepipeline.
RENTAL RATES: Lease rates continuegoing up especially in key
centers such as FortBonifacio and Ortigas Center.
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
3Q084Q081Q092Q093Q094Q091Q102Q103Q104Q101Q112Q113Q11
PHP/sq.m./mth
Rent Vacancy
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MANILA OFFICE REPORT 3Q112
MANILA OFFICE REPORT 3Q11
*Market terms & definitions based on BOMA and NAIOP
standards.
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accurate and complete.Cushman & Wakefield accepts no
responsibility if this should prove not to be the case. No warranty
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submitted subject to errors, omissions, change of price, rental or
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Village, Makati City, PhilipTrunk Line: (632) 750-6610Fax: (632)
750-6603
MARKET / SUBMARKET STATISTICS
MARKET HIGHLIGHTS
*Php/sqm/mth ** all grades
Exchange Rate:US$ = Php43.8100EUR = Php59.2750Source: CFEI
