Philippines Office Spaces

A very bright factor in the Philippine property market is the rising demand for office spaces. The demand for office spaces in the Philippines is mostly coming from companies engaged in the business process outsourcing (BPO) sector and IT-enabled services. As of early 2006, most office buildings in the central business districts in Makati City and Ortigas Center are fully occupied.

Starting 2006 and in the next several years, the Philippines may see an upsurge in office building construction as the BPO sector continues to grow at 50% or more annually, thus creating the need for more office spaces. Other sectors that would benefit from the multiplier effect of this trend are home building, restaurants, recreational centers and other facilities that cater to the well-paid employees of call centers and similar establishments.

CB Richard Ellis, the world's largest real estate advisory firm, said robust demand for Philippines office spaces was being driven mainly by relocations of multinational corporations and embassies from Grade B and C buildings and by continued demand from new and expanding call centers, BPO providers, and information technology companies.

With vacancy rates of office spaces in the Philippines dropping from their peak of 60% in the late 1990s to just between 9% and 15% as of early 2006, real estate developers are planning to add to the stock of office spaces which up to very recently suffered from a glut as a result of the 1997 East Asian financial crisis.

"Despite medium-term domestic economic concerns, the outlook for the office property sector remains bullish," the advisory firm said. "Limited supplies of suitable Prime/Grade A office spaces in the Makati CBD will keep vacancy levels in the single digits for the near and medium term while lease expirations in 2006 will be closely watched as they are expected to impact the amount of available space."

The property adviser noted that demand for Philippines office spaces was not confined to Makati and Ortigas Center.

Tight supplies of suitable existing office spaces in Metro Manila are forcing call centers and BPOs with large office space requirements to consider locating to areas outside the major central business districts," said CB Richard Ellis, citing the rising trend toward the construction of more build-to-suit buildings (specially in Alabang and Fort Bonifacio Global City), and the conversion of shopping malls and other types of retail establishments to space suitable for call centers.

Pushed by the call center boom, 14 new business districts are rising in Metro Manila.

Combined, these emerging locations will add about 1,300 hectares of developed land and more office spaces to meet the resurgent demand. Leading the development are big-ticket real estate firms that have deep pockets, long-term vision and track record.

Among these emerging business districts are:

• Eastwood City
• Araneta Center
• Newport City
• EDSA Central IT Zone
• Pioneer Business District
• Bay City

Analysts predict that over the course of the next ten years, the new business districts will become more attractive locations. The take-up might be gradual, over a 2.5-to three-year period, because it will be unlikely for tenants to flock too far away from Makati or Ortigas Center so soon. Decision makers prefer gradual change until the critical mass is achieved," analysts said.

More supply of such Grade A office spaces are expected once development goes full-swing in the other emerging business districts.

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