Last quarter, real estate services company Pronove Tai International Property Consultants forecasted a growth in the office space market for 2019, with a projected added supply of 1.04 million square meters. Philippine offshore gaming operators (POGOs) were also foreseen to increase their demand for space, considering that they had already taken up 45 percent of pre-leased transactions for 2019.
Now that the first quarter of this new year has passed, how are these projections shaping up? Pronove Tai shared their reports on the market’s current progress.
Healthy growth rates
The predicted growth of the office market seems to be on track. 276,000 square meters were added to the total office stock (or accumulated completed buildings from 1965 to Q1 2019), an increase higher than in any quarter in 2018. And while Makati, Taguig, and Ortigas still take the top 3 spots, Ortigas grew the fastest among all of the districts at a rate of six percent. It saw an added supply (or annual completed supply of space) of 110,100 square meters, solely attributed to the Podium West Tower by developers Keppel Land and SM Prime Holdings.
The four minor office districts (San Juan, Las Piñas, Pasig, and Parañaque) and Mandaluyong follow in terms of added supply. Each area brought in 68,000 square meters and 28,000 square meters, respectively. While the total office supply is 31 percent higher than the 2018 quarterly average, an ongoing cement shortage is already causing delays in building completion. For instance, only 15 buildings were completed during the quarter when the projection was 21 buildings.
Still, vacancy rates are increasing to healthier levels. It rose to 6 percent — up 2 percent from the last quarter — with Quezon City and Mandaluyong offering the highest vacancy rates.
Demand for space continues to grow strong, having increased by 39 percent year on year (YoY). IT and business process management firms (IT-BPM) and traditional firms remain the biggest demand drivers at 36 percent and 35 percent, respectively. But in terms of the greatest YoY increase, it’s POGOs with the highest figures.
Already taking up 29 percent of the demand, YoY increase went up by a staggering 118 percent. The need is so urgent that POGOs are already exploring Pasig, Parañaque, and Quezon City to set up camp, considering that there’s no more space in Makati and the Bay Area. Previously, POGOs weren’t looking at these districts because of their unfamiliarity to their foreign employees.
A need for convenience
If there is a common denominator that demand drivers across industries consider, however, it’s convenience. According to Monique Pronove, CEO of Pronove Tai, POGOs will always choose locations with easy access to residences, retail, dining options, and transportation. And while not all of these facilities are requirements for traditional firms, it’s definitely a plus factor looking at options.
It’s for this reason that township projects are becoming more appealing for tenants. The past fe years have seen more of these developments cropping up both within and outside of Metro Manila. Aside from the more recent completions like Nuvali in Laguna, more projects are already in the pipeline such as Megaworld’s Arcovia City along C-5.
“When tenants choose a location, they are now looking at partners who can build for them when they grow,” said Pronove. “There’s more challenge[s] for single-detached building[s] and smaller developers to compete with the big developers now. Because what they’re looking at are immediate availability of space and solutions to their needs when they grow.”