Metro Manila office rents seen to drop by 30%

By Angelica Y. Yang

RENTAL RATES for offices in Metro Manila’s business districts are expected to drop by as much as 30% this year, due to continued quarantine restrictions and economic slowdown, the Lobien Realty Group (LRG) said.

In a statement, the property consultancy firm said it forecasts a 25-30% decline in office rental rates starting this year.

“The lockdowns, which resulted in many business contraction and closures, the flight of many of the POGOs (Philippine Offshore Gaming Operators) and the prevailing economic situation in 2021 as a result of the coronavirus disease 2019 (COVID-19) pandemic are expected to increase office space vacancy rates and soften office demand in 2021,” LRG said, citing in-house research.

Office rents in 2020 did not reflect a decline because of the nature of the contractual agreements of POGOs, which usually pay security and advance deposits a year in advance, LRG said.

In an online press briefing on Friday, LRG Chief Executive Officer Sheila G. Lobien said average office rent across Metro Manila will remain soft in the next months due to low demand in office space.

This would be the case, she said, “unless the business process outsourcing industry would come back right away and expand, and the COVID-19 vaccine would be rolled out in the market.”

Ms. Lobien said three million square meters (sq.m.) of office space will enter the Metro Manila market in the next three years. The bulk will come from Makati, with an estimated 578,000 sq.m., followed by Pasig at about 508,000 sq.m., and Quezon City at around 506,000 sq.m.

“A lot of people are still buying properties right now, especially now that the market is somehow soft. They’re willing to take advantage of that and a lot of people, especially those who have cash are buying properties at the moment,” Mrs. Lobien said.

“But today (based on fourth quarter data) , you see half (of the average rental rates) going down, because many landlords are flexible now adjusting their rental and willing to talk to their tenants just to make sure that they’ll stay,” she added, referring to average rent rates in Makati, Taguig, Pasig, Mandaluyong, Quezon City, Alabang and Bay City.

Makati City Grades A and B; Taguig Prime and Grade A; and Bay City all saw a decline in average rental ranges during the fourth quarter.

Meanwhile, LRG said condominium developers are projected to launch around 24,000 sq.m. of residential units this year. It expects condominium take-up to reach 36,000 sq.m.

Pre-selling data last year showed a 45% take-up rate for condo units priced between P7 million to P15 million. LRG said that there was also a 41% take-up rate for units priced above P15 million.

LRG expects 2021 would be a “better” year for the industry, in light of the planned rollout of COVID-19 vaccines in the next few months.

“The speed and magnitude of the real estate recovery will also depend on the National Government’s ability to roll-out the vaccines and rebuild the economy through the government’s monetary and fiscal policies as embodied in the Bayanihan to Heal as One Law,” LRG said.