Are Manila's Office Rental Rates Poised for a Post-COVID Renaissance?
Date: October 16,2023
The Philippines has been experiencing a surge in economic growth, with equity analysts and private sector economists projecting an expansion between 5.5-7% in 2023. This optimism is underpinned by the government's positive economic outlook, and it's expected to have a significant impact on various sectors, including real estate.
One sector that's particularly intriguing in this scenario is the property market, specifically the residential and commercial leasing segments. In this blog, we'll dive into the latest insights from Colliers and other experts to assess the current state of the property market in the Philippines, focusing on residential leasing and office space rental in Manila.
The Resilience of Residential Leasing
The past two years have been disruptive for many industries, including real estate. However, there are signs of recovery in the residential leasing market. One key driver has been the demand from foreign employees of outsourcing firms, consular offices, and multilateral lending firms located in central business districts such as Makati, Ortigas, and Fort Bonifacio.
This increased demand has led to a decline in residential vacancies, which in turn has positively influenced rents and prices. While the market is on the path to recovery, it's essential to note that it's still a far cry from the pre-pandemic demand, particularly with the absence of demand from the offshore gaming sector, which previously fueled growth from 2017 to 2019.
Developers are carefully monitoring the interest rate environment and making adjustments to promotions and payment schemes to attract investors and end-users. The potential for condominium units to serve as a hedge against inflation is also being highlighted by property firms.
Moreover, there's a growing interest in launching horizontal projects outside of Metro Manila, as developers tap into strong end-user demand in the provinces. This shift could mark a significant change in the real estate landscape.
Navigating the Office Space Rental Landscape
On the other hand, office space rental in Manila has been experiencing a transformation. The impact of COVID-19 has reshaped the dynamics of leasing and occupancy rates.
Before the pandemic, office rental rates in key areas like Ortigas, Makati, and BGC varied, but after COVID-19, there's more room for negotiation. The costs associated with office rental go beyond the base price, including electricity, utilities, CUSA, internet, and VAT. Understanding these hidden costs is crucial for businesses planning to lease office space.
COVID-19 restrictions have also affected occupancy rates and the need for office density restrictions. It's now more critical than ever to plan for flexibility and consider the potential for remote work.
For businesses looking to lease office space, there's an opportunity to negotiate favorable deals due to the drop in demand. However, it's essential to be aware of upfront capital costs for office fit-outs and consider amortizing these costs over time.
Renting office space or leasing residential properties in Manila requires careful consideration of market conditions, hidden costs, and the long-term strategy of your business or investment. While the Philippine economy shows promise for growth in 2023, understanding the nuances of the real estate market is crucial to making informed decisions.
As the real estate landscape continues to evolve, both residential and commercial lessees must stay attuned to changing dynamics and market forces. Whether you're looking for a residential space or office space in Manila, now is a time of opportunity, but it's essential to navigate these opportunities with a clear understanding of the costs and uncertainties involved.