THE Philippine capital region was the third-cheapest prime office market of 23 countries in the Asia-Pacific region during the first quarter of 2024, according to real estate consultancy Knight Frank.
According to the Knight Frank Asia-Pacific Office Markets report, Metro Manila prime office costs averaged $28.28 per square foot during the quarter.
Kuala Lumpur ($17.91) was the cheapest, followed by Jakarta ($26.18). Rounding out the bottom six were Phnom Penh ($34.13), Bengaluru (35.99) and Auckland (41.94).
Meanwhile, the most expensive were Hong Kong ($159.63), Singapore, ($114.18), and Sydney ($93.47).
“Despite elevated vacancies of close to 25% in Southeast Asia’s emerging markets, prime rents rose by an average of over 2% quarter on quarter mainly on the strength of Manila’s market,” Knight Frank said in the report.
Rents in Manila declined 5.4% year on year, steeper than the 3.2% average drop in the region.
Fifteen of the 23 cities monitored in the region reported stable-to-increasing rents year on year, up from 13 in the fourth quarter of 2023, Knight Frank said.
Manila also recorded a 12.9% vacancy rate in the first quarter, which is projected to rise in the 12-month forecast, the consultancy said.
Seoul recorded the lowest vacancy rate at 1.3% and Kuala Lumpur has the highest at 29.7% in the first quarter.
“Vacancies in the Philippine capital tightened by close to 4% points during the quarter from 16.4% in Q4 2023. A year ago, vacancies were threatening to breach 20%,” it said.
Meanwhile, Manila office space in the pipeline this year is expected to double and exceed 100,000 square meters.
Manila pipeline supply is estimated at 3.5% of the current stock with flight to quality to new projects expected as new stock in 2024 “hits a cyclical high.”
Despite the expected rise in vacancy levels, Knight Frank noted that Philippine outsourcing has experienced a “robust recovery” in the second half of 2023, with rapid take up, especially from existing tenants expanding in top-rated buildings.
Across the region, average prime rents registered their seventh consecutive quarterly decline to 3.2% year on year in the first quarter of 2024, compared with the 2.4% year-on-year fall in the fourth quarter of 2023.
It added that the regional vacancies marginally rose to 14.9%, sustaining a trend that have seen the metric continually breach record highs since the fourth quarter of 2022.
Knight Frank said it is cautious about the expectations for the office market in the region but on the whole, the prime office segment will remain tenant-favorable in 2024 with the vacancy rate expected to stay on an upward trend.
It said occupiers in the region are signaling more return-to-office work arrangements and registered significant gains in sentiment pointing to a return to pre-pandemic levels of occupancy.
“A consistent theme across the region is the strength of demand for space at the higher end. These conditions were particularly acute in Australia and New Zealand but also observed in Tokyo as well as Southeast Asia’s emerging markets,” Knight Frank Global Head of Occupier Strategy and Solutions Tim Armstrong said.
Mr. Armstrong added that the firm expects a flight to quality to intensify as occupiers optimize portfolios, experiment and evolve their hybrid work plans and hit environmental, social, and governance targets. — Aubrey Rose A. Inosante
