MANILA, Philippines - Pinnacle Real Estate Consulting Services Inc. said advanced space take-ups will open more opportunities in the office market this year.
Based on its April 2014 Real Estate Market Insight report, developers are now more confident to put up office buildings since they can get precommitments, especially from big space users.
There has been an observed pickup in office space preselling in office spaces have been picking up in recent months, indicating the market’s “pre-leasing” behavior to avoid the space crunch, the report said.
Pinnacle’s report shows that vacancy rate of Premium Grade A and Grade A buildings is at an all-time low of below 5 percent across all the major business districts in the country.
While they may have higher vacancy levels, Grade B and C buildings are expected to eventually absorb the overspill of demand for office spaces.
Depending on the vacancy of the buildings, rents are projected to increase between 3 percent and 7 percent this year. Lease rates in Premium Grade A are currently higher than P1,000 per square meter (sq m) a month, while those in Grade A average at P750 per sq m.
Small and old buildings in Makati are rented out for an average of P550 per sq m on a monthly basis.
Pinnacle said industry players may opt to redevelopment, selling or leasing, and even joint developments with others. To capture the demand for office space, old building owners, for instance, may consider retrofitting their facilities or redeveloping altogether.
Joint developments are likely for building owners even with condominium corporations if owners do not want to sell the land or would want to share on the upside of the development.
For straightforward office projects, developers may choose to sell to recover their investment faster, or may want the recurring income. In most cases, Pinnacle said developers would opt a balance between selling some floors while retaining others for leasing.