A glut of office supply is forcing landlords to compete for limited tenants by lowering rent, according to a leading global property services company.
Benedicto Clark T. Miranda, director and head of Capital Markets and Investments for the Philippine office of Jones Lang LaSalle, said the Grade A office market is in for a rough ride as corporates cut back on spending amid an increasingly difficult business environment.
Miranda said developers or owners of prime office buildings are lowering rental rates by 15 to 20 percent to seek more tenants and woo clients back.
From a peak of P1,200 per square meter, office rental cost is reportedly now down to P700 to P800 per square meter.
“There’s a lot of supply coming on stream with BPO firms taking a step back and withholding expansion. To survive the crisis, developers are offering a lot of perks and longer terms to entice people to buy,” Miranda said.
He said the residential condominium market is also expected to sail choppy waters this year given an oversupply.
He said some 125,000 residential units are expected to come on stream between 2008 to 2011.
There was an increase in supply for condominium units by 141 percent and economic housing units by 55 percent from 2007 to 2008, which indicates a growing preference for packages.
In the face of a gloomy market, many developers would rather slow down project construction and new product launches as they focus on selling their inventory.
Last year, real estate companies built 360,000 square meters of office building space mostly catering to BPO firms, resulting in an excess of 145,000 square meters.