Metro Manila’s office occupancy rate improved to 80 percent in the third quarter of 2023 from 75 percent in the fourth quarter of 2022, property advisor Santos Knight Frank said Friday.
Bonifacio Global City and Makati continued to show the highest occupancy rates in Metro Manila at 89 percent and 80 percent, respectively.
“The office market has continued its road to recovery post-COVID. The increased demand from conventional office tenants and flexible office operators has significantly contributed to the upswing in commercial leasing requirements. We are expecting this momentum to continue in 2024,” said Santos Knight Frank chairman and chief executive Rick Santos.
Manila also led the price growth at 21.2 percent in the luxury residential sector—the fastest across the world, according to Knight Frank’s Prime Global Cities Index.
Santos said the strong investor confidence in the Philippines buoyed the real estate market despite rising interest rates.
“The luxury residential space is one of several sectors where we’re seeing encouraging market activity. Pent-up demand for prime properties, the return of the residential leasing market, and the tight supply of developments have contributed to significant price appreciation especially in central business districts,” Santos said.
The improving economy also boosted growth of key sectors. The Asian Development Bank and the World Bank expects the Philippines’ gross domestic product to grow by 6 percent and 5.6 percent, respectively.
Post-pandemic, the choice between in-office work and a flexible remote model has been shaping the office market, Santos Knight Frank said. There are signs that companies now are making long-term plans about their workplace setups, it said.
Office occupiers prefer quality buildings that provide good value. Prime buildings’ vacancy rate at 17 percent are better than the average office buildings’ vacancy of 20 percent in the third quarter, even when prime lease rates averaged at P1,244 per square meter a month compared to the market’s P980/sq. m.
Makati City emerged with the highest lease rate in the metropolis, with weighted average lease rate of P1,143/sq. m. per month. Fort Bonifacio ranked second at P1,098/sq. m., followed by the Bay Area at P902/sq. m.
Buyers have shown an increasing appetite for second homes since the pandemic. About 41 percent of respondents in a survey by Santos Knight Frank in 2021 said they were eyeing to buy a second home, a higher proportion than in Asia Pacific.
The trend is likely to continue in 2024, Santos Knight Frank said, with local buyers acquiring leisure properties in Luzon either for their own use or investment.
Santos Knight Frank observed the emergence of increased customer spending termed as “revenge spending”.
Metro Manila’s retail stock sits at 5.1 million sq. m. Taguig recorded the best-performing occupancy rate at 93 percent in the third quarter. Meanwhile, the Bay Area recorded the lowest at 85 percent caused by the addition of new 78,00 sq. m. of leasable area.
The positive performance of the retail market impacts the logistics sector. In the first half of 2023, Manila’s warehouse lease rates jumped by 30 percent, the highest in Asia Pacific – driven by supply chain, e-commerce and retail activities.