Metro Manila and submarkets battle with office market

Vacancy rates have increased, but construction delays from COVID-19 might help relieve the intensity  

Modern financial and business district of Metro Manila, Philippines. KieferPix/Shutterstock

KMC, an affiliate of Savills, recently released the Office Briefing for Q4 2020, which indicates vacancies, rental rates, and supply pipeline in Metro Manila’s central business districts and submarkets 

In the last quarter of 2020, leasing activity across Metro Manila continued to stumble with around 75,300 square metres of Grade A office space vacated.  

Vacancy rates in 2020 nearly ended at 10 percent, and with 1.1 million square metres of office space available in 2021, the market is expected to experience further pressure.  

As a result of COVID-19, construction has been delayed, postponing projects to 2022, which might help relieve the intensity of vacancy rates caused by saturation.  

Metro Manila’s average rental rates ended 2020’s last quarter at PHP1,000.6 (USD20.81) per square metre per month. Significant shifts can be anticipated this year, as landlords release new market offerings to help reset the market.  

With the Philippine Offshore Gaming Operator (POGO) exodus, the market is starting to examine the consequences. As more than 282,500 square metres of office space are currently occupied by POGOs throughout Metro Manila, the market should be kept under scrutiny in the upcoming months.  

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Other submarkets like McKinley and Greater Ortigas have gradually experienced declines in Q4 2020, with Grade A office space encountering decreases of 9,600 and 2,100 square metres, respectively. On the contrary, C5 Corridor had 13,900 square metres taken up for the quarter. 

Makati fringe underwent the biggest hit with a huge jump in vacancy rates from one percent in Q3 2020 to 16.3 percent by the end of the year.  

C5 Corridor and Greater Ortigas may experience similar conditions in 2021, as tenants contemplate on relocating to major CBDs with an overflow of new stock. McKinley might remain competitive due to its position with the O&O sector in 2021.