THERE were fewer office space vacancies in Metro Manila in the second quarter (Q2) of 2024, according to research published by Cushman and Wakefield. The commercial real estate services provider said the availability of Prime and Grade "A" offices in the metro decreased by 129 basis points (bps) from the 16.5 percent vacancy rate in the first quarter and 167 bps lower than the 16.9 percent in the same quarter in 2023. The construction of buildings with Prime and Grade "A" offices added 113,000 square meters (sqm) in the second quarter, bringing the total stock to 9.65 million sqm, resulting in a quarterly net absorption figure of roughly 203,000 sqm. "Metro Manila's commercial real estate market remains in the recovery phase in Q2 2024," Cushman and Wakefield Director Tetet Castro said. "The average asking rent remains steady at P1,010/sqm/month, as high market and building vacancies prevail," added Castro, who heads Cushman and Wakefield's tenant advisory group. However, she pointed out that "vacancy rates will remain elevated in the medium term due to the huge volume of upcoming developments, delayed the passing of amendments to the Create Bill and the pronounced total ban on Philippine offshore gaming operators (POGOs)." For the office market outlook, research shows a heightened demand for tier 2 or outside metropolitan cities locations, as information technology and business process management companies need office spaces. The demand is said to have access to the talent pool in provincial areas, with lower capital and operational expenditures. There is also a continued demand for serviced offices "as an alternative to traditional offices" since these have no capital expenditure, a viable option for new businesses in the country. Cushman and Wakefield director for consulting and advisory services Claro Cordero commented: "Until the directive to completely ban offshore gaming operations in the country by the end of 2024 is made official, the establishment of Internet Gaming Licensees is seen to provide a reprieve to the current market uncertainties created by the policy pronouncement." He added that in the long run, the banning of POGOs will add downward pressure on rents due to elevated office market vacancies. "An observed pullback in discretionary expenditure persists against a weakening global economic backdrop and rising cost-of-living pressure, which paint a more challenging landscape for retail space, a first after seeing the effects of revenge spending right after the extended lockdown period," said Cordero, head of research at Cushman and Wakefield. The firm expects new retail space supply at around 177,000 sqm in gross floor area for 2024, a massive drop from the recorded 443,333 sqm delivered last year. "Estimate gross rental yields for the Manila market will continue their upward movement in the near term as interest rates yet to make significant downward movement," the group said. "Given the varying degrees of geopolitical, climate and interest rate risks present in the Philippine property market, the long-expected return to the recovery track is at bay for an extended period," Cordero concluded.
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