MORE and more business locators are now moving in to Taguig City, rather than to Makati City, because of its lower tax rate and more office space available, Jones Lang Lasalle (JLL) said on Tuesday.
Comprising mostly of Bonifacio Global City (BGC), McKinley Hill and Uptown areas, Taguig accounts for 48 percent of the overall demand drivers by location based on transactions tracked by the property consulting firm in the first half of 2016, JLL Regional Director Lizanne Tan said.
At present, rental rate in this area is already similar to Makati City. For instance, Grade A buildings in Taguig are leased for P850 to P1,300 per square meter, which is akin to that in the latter at P950 to P1,200 per sq m.
“Although the rents are quite similar to Makati, many companies are pretty much eager to move to Taguig City because of lower tax rates,” she said, without citing exact figures. “So it really depends, I guess, on what type of business you’re in. But as a general rule, a lot of companies feel that business tax rates are still lower in Taguig versus Makati. And so this is mostly the reason they are quite interested to move over to this particular location.”
Apart from the kind of progress the city has undergone, so far, Tan said the numerous developments that allow businesses to scale up are what also make Taguig attractive to them to set up shop.
She noted, though, the traffic situation and congestion going in and out of the city are among the concerns of locators.
“When you’re in Taguig—in the actual city—you don’t really encounter these problems. But if you’re moving from Taguig to Makati, Ortigas or Quezon City, you will notice that congestion is actually pretty difficult here,” she said.
Expectation in this city is, likewise, bullish, given the massive inventory of office space today and beyond.
Currently, Taguig has a total stock of 1.6 million sq m of office space, including existing buildings and in the pipeline up to the end of this year. The annual supply for 2016 stands at 445,000 sq m, or 62 percent of the total supply.
“So there’s really a lot of demand that’s still coming in to Taguig City and there’s still a lot of development happening within this location,” the executive said.
Coming in second as the preferred site by office occupiers in Metro Manila at 21 percent is Makati, which currently has around 1.8 million sq m of office stock. The annual supply for this year is only 30,300 sq m of office space, of which 21 percent has been already leased.
For Pasig City, mainly the Ortigas area, rental range is still low at P600 to P750 per sq m. Considering that it’s like a discounted rate versus that in Makati and Taguig, a lot of companies are still growing in this particular area, Tan said.
She cautioned, however, that it has limited office space, with around 22,300 sq m of office space delivered within 2016, and almost 100 percent leased.
“[But] there’s going to be some increase [in the office stock] starting 2017 and 2018 in this particular area, with the likes of developments of the likes of Megaworld, Ortigas & Co. and Ayala Land for 2017,” she said.
Compared with other areas in the metro, the executive cited Quezon City as “a popular city” that has continuously become such because it’s the biggest in terms of population.
Rental rates here are similar to Pasig City, but due to its popularity, plus the various developments around, they have actually started to go up to about P550 to P850 per sq m.
“A lot of big developments here are quite popular because of the availability of large floor plates that cannot really be achieved in most of the central business districts. For big takers, they are able to take in more space in this particular location,” Tan said, noting the accessible transport system here is also a plus factor for occupiers.
It is in Quezon City where the second-biggest stock is seen coming in to the market in 2017, with about 213,400 sq m of office space, next only to Taguig’s 394,900 sq m of office space.
Meanwhile, Alabang, according to Tan, has actually started to gain some in terms of interest from a lot of corporate clients.
This is because rental fees here are quite discounted compared to all the other cities, and there’s a lot of good stock coming in to the market.
For this year, JLL tracks about 32,000 sq m of office space in this side of Muntinlupa, of which almost half, or 43 percent, has already been leased out.
“But we’re seeing more stock coming in to the market in 2017. This is actually quite an attractive location, especially for people coming from the South [or] from labor pools in Cavite and Laguna. So the advantage also of Alabang, much like of Quezon City, is the big floor plates that developers are able to achieve in this particular location,” Tan said.
In Pasay the Bay City area has had constant interest for a lot of occupiers, especially those with big chunks of space as their requirement.
The JLL regional director attributed this to property giant SM Development Corp. of Henry Sy.
“Developments of SM have been very popular and they’ve been very good in using their office premises. So the advantage really of Bay City is being able to cater to big BPOs [business-process outsourcing] and call centers because of their requirements,” Tan said.
The annual supply in the Bay City is pegged at 109,400 sq m of office space this year, and is expected to go up to 53,500 sq m in 2017.
Overall, the office demand has been constantly expanding since 2012 due to the growing BPO industry.
For 2016, JLL already tracked approximately 721,100 sq m of office space that is delivered and is going to be delivered to the market, with 56 percent already leased from the existing supply. Vacancy levels in the Metro are still low at 4 percent of the current stock.
“This number has actually changed since the start of the year, because we saw some developments supposed to be delivered at the end of this year that slipped to 2017,” Tan said.
Because of the current demand, she said the market remains quite favorable still for the landlords.
“We are seeing a lot of pre-commitments from the bigger tenants to be able to take advantage of low rental rates. The market is still strong, especially in central business district areas, like Makati and BGC,” she said. “In 2017 we’re tracking about 1.2 million sq m of office space that will be delivered to the market. The bulk of that will be coming in the first half of 2017, mostly also because of some of the slippage from the developments supposed to be delivered at the end of this year.”