Commercial real estate boom: Why office spaces are in high demand
The demand for commercial property for rent within Metro Manila is exponentially increasing as international companies are continually attracted to the Philippines as an outsourcing location, with the average lease rate increasing by 8% ($18/sqm) by the end of 2014. This figure is has been predicted to reach record levels over the next few years as property developers attempt to match supply with the global demand for corporate buildings to house outsourced staff. Prime property candidates for Rent Commercial Property real estate projects include the Makati central business district, Metro Cebu and Metro Manila, all preferential in terms of quality and price of office spaces.
Outsourcing has been an increasing trend in the corporate world over the last few years, with international companies being enticed by the low operation costs, cheap commercial property for rent space and a workface with strong English proficiency levels found in the Philippines. Mainly driven by the information technology and business process outsourcing (BPO) sector, maintenance and backend developer roles where geographically based staff is not important are usually the crux of the job positions available. That said, companies such as Google and HSBC are continuously looking at offshore office spaces to house their outsourced workers, and the Philippine property marketing is under pressure to provide for this increasing demand.
According to the report published by Colliers International Philippines, Commercial Properties for Lease by real estate developers added 466,354 square metres of office space in 2014, almost reaching the all-time high of 467,030 square meters in 2009. Furthermore it is estimated that a further 1.85million square metres of office space will be added in 2015 to 2017 in booming business districts Makati, Oritgas, Bonifacio Global City and Quezon City. However with over 50% of the office spaces provided for 2015 already leased by the end of February, it is anticipated that this number may not be enough to equalise supply and demand.
Despite the struggle to meet this figure, Wong+Bernstein Business senior advisor Enrique M. Soriano III says this only positively reflects the Philippine’s rising economy on a global level.
“The office demand and supply market will always mirror the state of our economy,” says Soriano. “We can see that there is a definite strong performance of the Philippine workforce and a steady economic growth.”
Despite the favourability to the Philippines, one possible hindrance to the country’s corporate attractiveness is the capital’s susceptibility to natural disasters such as earthquakes and landslides, which was recently brought back into the spotlight following the events in Nepal. Although this may serve as a deterrence to multi-national companies, Philippine property company CBRE Philippines believe this should not have a major effect on the decision to base international offices, as it is one of the reasons multi-national companies offshore their work in the first place.
“Business can’t afford to shut down so what you’ll see is that a lot of multi national companies set up in different places in part to guard against the risk of a disaster temporarily shutting down a firm’s backroom operations.” says founder and chairman Rick Santos.
“A firm setting up a BPO or satellite office would likely set up a few satellite offices in multiple areas and countries in case of a natural or man-made disaster affecting one centre.”
Morgan McGilvray, a CBRE director who represents Californian firms investing in the Philippines, says that major property developers who are currently responsible for the new buildings in the Metro all have to ensure that their buildings obey a strict quality code. This code is essentially in place to make sure that the buildings are structurally sound and has maximum strength to protect against natural disasters as much as possible
“When these firms are looking at buildings here, they analyse them carefully in terms of disaster preparedness using their own teams.”
Average office rental rates are currently at P828.11 ($18.50) per square metre within Metro Manila.
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