Metro Manila office rates in business districts decline as tenant leverage increases — report

Office rates in most central business districts in Metro Manila have been declining due to the strong tenant leverage in negotiations, a report released by consultancy firm PRIME Philippines on Tuesday showed.

Data from PRIME Philippines show that office lease rates have declined in three central business districts — Makati down 2.2% to average of P1,125 per square meter (sq.m.); Ortigas down 3.0% to average P750 per sq.m.; and Quezon City down 8.5% to average P650 per sq.m.

“It’s really because we’re still in a tenant-driven market for the office markets so in terms of negotiations, there is still that level of leverage towards tenants demanding terms and conditions that are at par with what they want,” PRIME vice presiednt Mervyn Valenzuela said in a briefing in Makati City.

“Now the sentiment of the landords is softer to accept flexible or usually unique commercial terms proposed by the tenants because of the still ongoing tenant’s market,” he added.

Office lease rates per square meter have increased in two central business districts — Bonifacio Global City up 12% to average P1,250, and Bay Area up 3.0% to average P700, while those in the Alabang central business district were stable at an average of P700.

“Recently we have observed some pushbacks from lessors because of the recent steady but slow increase in occupancies in metro Manila,” Valenzuela said.

PRIME said occupancy levels mostly held steady across central business districts in the first quarter — Makati at 89.2%, BGC at 88.1%, Ortigas at 90.6%, Quezon City at 82.9%, Bay Area at 68.5%, and Alabang at 71.1%.

According to Valenzuela, a lessor in BGC declined a deal with a lessee for lower rates, even if the proposed contract is good for 10 years.

“It’s largely driven by the occupancy levels of those specific cities. There are some cities that are still not yet up to their levels compared to pre-pandemic,” Valenzuela said.

“It’s really about the fact that the supply has not yet been absorbed as fast as the developers from those areas,” he added. — BAP, GMA News