Comm’l property growth to remain

Rick Santos, chairman and chief executive officer of SKF (center) with Alistair Elliott, senior partner and group chairman of Knight Frank (KF) and other KF and SKF officials at the press conference on Philippine BPO office market trends Tuesday, 18 September 2018 at the Makati Shangri-La. (contributed photo)

The world’s largest independently owned property consultancy remains optimistic in the growth of the Philippines’ commercial real estate sector as the country’s economy is set to expand by 6.7 percent this year.

Alistair Elliott, senior partner and group chairman of Knight Frank, expressed the property consultancy firm’s optimism on the basis of its local partner Santos Knight Frank’s (SKF) mega deal during a press briefing Tuesday, 18 September 2018, at the Makati Shangri-La hotel.

“Our partner, Santos Knight Frank, recently brokered the largest office lease in Philippine history — a 70,000-square meter deal between JP Morgan Chase & Co and Megaworld in the Bonifacio Global City. This speaks a lot about the level of confidence in the country’s real estate market and Santos Knight Frank’s leadership position in the commercial office leasing sector,” said Elliott. “This is my first visit to the Philippines and all I have seen reaffirms the outstanding choice that my firm made in partnering with Santos Knight Frank.”

“The commercial real estate sector in the Philippines is still one of the hottest markets for investors, including the U.S., China, South Korea and Asia. The rest of the year will see greater activity in the market as buyers and investors capitalize on the growth of secondary cities, improving infrastructure and strong fundamentals,” Rick Santos, chairman and CEO of SKF, the country’s leading commercial real estate service provider, said at the briefing.

In the remaining months of the year, an additional 1.47 million square meters of prime office spaces are expected in Metro Manila, representing 30 percent of the current stock, the firm’s officials presented at the briefing.

The business process outsourcing (BPO) industry continues to drive demand along with new entrants from the Chinese online gaming sector, resulting to an overall decline in vacancy rate from 4.9 percent in the first quarter to 4.5 percent in the second quarter of the year.

The retail real estate sector is also expected to add around 500,000 square meters of space this year after local consumer spending rose by 5.6 percent spending during the first quarter of 2018. With greater consumption activities, the industrial real estate sector has subsequently seen rising demand for storage and warehouse facilities.

Meanwhile, prime office rents in Metro Manila has risen but remains the second most affordable in the Asia-Pacific (Aspac) region, according to SKF.

Strong demand for prime office space in Metro Manila has propelled rents to rise by 10.6 percent year-on-year during the second quarter of 2018, SKF reported.

Despite the increasing rent, the country’s office market remains one of the most competitive in the region by having the second lowest gross effective rent of P1,178 ($22), SKF said.

Manila, which was second after Sydney in year-on-year rental growth, saw prices increase by 2.4 percent quarter-on-quarter as demand from the BPO sector remains robust.

“The IT-BPO sector occupied nearly 80 percent of prime office space last year, and we don’t see its growth momentum stopping anytime soon. Demand for office space in Manila remains extremely strong, reflecting the country’s solid position as one of Asia Pacific’s most important investment destinations,” said Rick Santos, chairman and Chief Executive Officer of SKF.

Vacancy in Manila slimmed down to 4.5 percent, coming from 4.9 percent in the first quarter of the year. In total, about 60 percent of the 1.47 million square meters of new office supply in the rest of the year is already pre-committed.

SKF forecasts that the expansion of BPOs in the Philippines will continue not only in the capital but also in the provinces as investors capitalize on favorable demographics, affordable rent, strong macroeconomic fundamentals and the strength of the dollar.

SKF’s Asia-Pacific Prime Office Rental Index, which tracks the performance of prime office rents in 19 cities, recorded a 2.4 percent increase quarter-on-quarter in the second quarter – almost three times that of the first quarter at 0.9 percent. Rents are expected to remain steady or see marginal increases for the rest of 2018, added SKF.

Sydney, Manila, Bangkok and Bengalaru posted the highest year-on-year rental growth as rents in Perth, Shanghai, Phnom Penh and Kuala Lumpur all recorded a decline.

Meanwhile, the most affordable cities in terms of gross effective rent were Kuala Lumpur, Manila, Perth, Phnom Penh and Bengalaru.

p: wjg

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