Manila office rents inch up 0.6% in 4Q21

Capital values also incrementally increased by 0.8% q-o-q.

Manila office rents increased 0.6% quarter-on-quarter to PHP 1,127 per sqm per month.

According to JLL, the majority of the office developments have maintained their rents, and the increase is coming mostly from older buildings with newly vacant spaces which are now being offered at current market rates.

Here’s more from JLL:

Capital values also grew incrementally to PHP 172,751 per sqm, up by 0.8% q-o-q. Minimal to no movements were observed for the majority of the developments and average prices were pulled up by limited inventory available for Alveo Financial Tower.

Negative net absorption continues to ease, albeit still negative

Net absorption in 4Q21 continued to ease, settling at -1,900 sqm from -46,700 sqm recorded in 3Q21. The improved absorption was supported by notable take-ups and renewals coming from financial institutions and traditional firms, as well as a slowdown of pull-outs and downsizing across industries.

New lettings and renewals buoyed net absorption in 4Q21. Notable transactions recorded included a 3,400-sqm lease by a financial institution in Taguig City, as well as a 1,900-sqm and a 3,200-sqm transaction by a foreign real estate firm and an airline service company, respectively, in Makati City. Pull-outs are led by POGO firms and some O&Os, flexible workspace providers, and traditional firms.

No new stock added in 4Q21 due to supply slippages

No completion was recorded in 4Q21 as expected stock was delayed to 2022. Two office developments, specifically One Ayala Tower 1 in Makati City, and Manta Corporate Plaza in Taguig City were pushed back to 2022. Construction delays will bump up expected supply in 2022 to 612,000 sqm which may add pressure to the already elevated vacancy.

Vacancy rate continued to inch up to 13.2% in 4Q21, up by 4.0 bps q-o-q on the back of office pull-outs and downsizing across industries. The recorded figure is slower compared to previous quarters where vacancy uptick ranged from 110 to 150 bps.

Outlook: Office sector may regain momentum in 2H22

Slower leasing demand seen in the next six months due to rising COVID-19 cases and elections, which may prompt stakeholders to defer plans. The FIRB’s call for WFH arrangements in the IT-BPM sector until March 2022 may dampen expansion until directive has been lifted. Leasing volumes may gain traction in the second half once the market gains clarity on policies, coupled with increased inoculation.

Rents are projected to recover in tandem with improved leasing volumes. Nonetheless, landlords may likely maintain rates and retain flexible terms to close deals. Meanwhile, capital values are expected to continue trending upwards driven by renewed interest from investors seeking market opportunities.

Note: Manila Office refers to the Makati City and Taguig City Grade A office market.