By Rizal Raoul Reyes
THE business-process management space continues to be a major growth driver of the property sector, with more outsourcing and offshoring companies seeking office spaces in the country.
Michael McCullough, cofounder and managing director of KMC MAG Group, the Philippine associate of global property advisor Savills, said the demand saw a remarkable demand in Metro Manila’s office spaces, especially in 2015 where net take-up for premium and Grade A office spaces totaling to 459,000 square meter has been the highest recorded so far by the company.
“Makati’s Central Business District [CBD] maintains its position as the most premium CBD in Metro Manila, while the Bay Area and Quezon City are expected to continue outperforming other Metro Manila submarkets, given the supply and demand dynamics within these markets,” McCullough said recently in a press statement.
By being country’s premier office space location, Makati commands an average rental rate of P980.8 per sq m per month, the highest in Metro Manila. McCullough said there is strong possibility that vacancies in the Metro will grow in the next three years, even with strong preleasing activity due to the entry of some 1.8 million sq m of office spaces, most of which are in Makati CBD, Bonifacio Global City, Alabang, Quezon City and the Bay Area. He noted the coming in of these supplies is expected to ease the rental growth in most submarkets in the coming years
“Looking at it from a global perspective, the Philippines and Asian real estate, in general, have enjoyed a strong run over recent years,” McCullough said. “In the fourth quarter of 2015, Asian markets were able to put US interest rate worries behind them as the US Federal Reserve increased the base rate by 25 basis points, with little immediate fall out.”
The Savills’s World Office Yield Spectrum reported that Manila has the fourth-highest Grade A Market Yield at 8 percent in December 2015, with Hanoi being the highest followed by Ho Chi Minh and Adelaide. The Market Yield is derived by capitalizing current market rents, which includes the rent payable by the tenant and the value of any incentive paid to the tenant, against current capital values for office buildings.
In terms of Grade A Effective Yields, Manila places third globally with an effective yield of 7.5 percent, with Hanoi being the highest, followed by Ho Chi Minh. Effective Yields are derived by capitalizing current market rents, which includes the rent payable by the tenant and excludes the value of any incentive paid to the tenant, against current capital values for office buildings.
“Globally, much of what happens in 2016 will be dependent on the course the US Federal Reserve takes with regards to interest rates. The movement of US interest rates will determine how currencies behave, how trade flows and how capital moves around the world,” McCullough said. “Risk premiums of between 2 percent and 3 percent in most office investment markets around the world continue to look like fair value, so we anticipate ongoing and strong international demand in office property in 2016.”
Image credits: Bong Bajo, Archaznable, www.realestate.ph
1 comment
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