Date: November 20, 2024
As we transition through the latter half of 2024, the Manila rental market presents a rich tapestry of changes, influenced significantly by regulatory shifts and evolving market dynamics. The exit of Philippine Offshore Gaming Operators (POGO) has left a noticeable imprint on the landscape of office and residential rentals, while various sectors adapt to new norms and opportunities. This analysis delves into the key aspects shaping the Manila property scene.
1. Regulatory Impact and Office Space Dynamics
The withdrawal of POGOs has led to a noteworthy downturn in the Metro Manila office market—a first since 2021—with vacated spaces outnumbering new demands. This shift is further amplified by the looming end of leases initiated before the pandemic, pointing to a surge in office vacancies and a static net absorption rate as the year concludes. Analysts from Colliers suggest this could be a critical moment for stakeholders to reassess their positioning and strategies in the market.
Complicating the scenario are external influences such as the outcomes of the U.S. Elections and ongoing regulatory modifications, including those introduced by the CREATE MORE initiative and the POGO ban. These factors are expected to cast long shadows into the next year, affecting decisions in the real estate sector. Landlords and tenants are urged to factor these elements into their planning, anticipating shifts in the office market that could redefine occupancy and leasing dynamics well into 2025.
2. Resilience in Net Absorption Amidst Market Shifts
Despite the overarching challenges, the third quarter of 2024 reported a net absorption of 19,500 sqm, propelled by significant leasing transactions and strategic move-ins. This positive indicator is highlighted by substantial leases undertaken by a BPO in Taguig for 2,785 sqm and an FMCG firm for 2,178 sqm. The full occupancy at Filinvest Buendia, with a government entity securing around 10,000 sqm, reflects a sustained demand for strategically located office spaces, despite the broader market's fluctuations.
This period also witnessed the introduction of new office space amounting to 24,000 sqm with the completion of Filinvest Buendia and MJ Tower Fort, providing fresh avenues for business expansions and relocations. These developments signify a market that, while facing withdrawals and vacancies, still offers growth opportunities through new infrastructure and adaptive leasing strategies.
3. Trends in Rental Rates and Capital Values
The rental market in Manila has maintained stability, with average rates holding at PHP 1,125.4 per sqm per month. Landlords are navigating the market's volatility by balancing incentives to attract and retain tenants against the need to adjust to occupancy levels. In areas with higher occupancy, landlords have leveraged their position to incrementally increase rents, whereas others have reduced rates to remain competitive.
Capital values in the office sector saw a slight increase of 1.4%, reaching PHP 182,566 per sqm. This uptick is supported by improved investor confidence and anticipation of policy adjustments by the central bank in response to managed inflation levels. The office market's outlook remains cautiously optimistic, with projections of sustained growth driven by the BPO sector and traditional businesses, despite the departure of POGO establishments possibly affecting specific districts.
The Manila rental market's narrative in the third quarter of 2024 is one of adaptation and anticipation. Stakeholders are currently navigating a landscape transformed by significant regulatory changes and shifts in global economic conditions. While the market faces challenges such as increased vacancies and evolving tenant demands, the ongoing developments and strategic adjustments present new opportunities for growth and investment.
The resilience shown in net absorption rates and the strategic responses by landlords to stabilize or grow rental incomes illustrate a market capable of weathering instability. As businesses continue to adjust and realign their operations with the new market conditions, the outlook for Manila’s rental market, though peppered with uncertainties, remains fundamentally strong. Investors and tenants alike will find value in staying informed and agile, ready to adapt to the rapid changes that define Manila's dynamic real estate landscape.
References:
Comments