Market for prime office space in Metro Manila remains sluggish

The market for prime office spaces in Metro Manila remains sluggish this year, possibly forcing some delays in the completion of several high-rise office buildings, a leading property research firm said.

FPDSavills, in its March Office Briefing Report, said although the Grade "A" segment was beginning to consolidate after an extended period of decline as a result of continuing oversupply, the market remains weak as more stocks will soon be added up to this inventory.

"Although increased activity was noted (primarily leasing) within the last six months, office space take-up simply cannot keep pace with the oversupply situation in the high-rise office property market," the report said.

It added that a total of 327,529 sqm. of new prime office spaces will be added up this year to bring the Grade "A" segment to about 1.015 million sqm -- already a third of total office stock. Around 70 percent of this is in Makati and the balance in the Ortigas Business District.

Due to supply pressures, occupancy rates have fallen by more than 50 percent since their peak in 1996, the report added. Average effective rents for Grade "A" offices in the Makati and Ortigas CBDs have dropped within the range of P500 to P550 per sqm and P300 to P350 per sqm., respectively, in the first quarter.

The property consultancy firm said taking these considerations, backed up with discussions with project managers on site, "we believe there are possibilities of delays in project compeltions," specially for high-rise prime office buildings.

Among the projects lined up for completion within a year include the GT Tower (Q1 2001); RCBC Plaza (Q1 2001); Raffles Corporate Center (2000); and AIC Empire Tower (Q1 2001).

"Capital values have remained flat as no activity in the sale of strate-titled office properties were noted in spite of a growing number of stock for disposal. Most investors have adopted a wait-and-see attitude in anticipation of further price declines, particularly for distress sales," the report said.