Wealth and investment activities are spreading steadily across the Philippines, Southeast Asia’s top performer in 2015 with economic growth of 5.8 percent. The development momentum is especially palpable in Metropolitan Manila, the capital.
Among its key central business districts (CBDs), the office property market is showing no signs of slowing down. In the third quarter of 2015 alone, the sector saw its highest recorded net take-up for premium and Grade A office space, reaching 231,412 square meters.
According to Michael McCullough, managing director of the KMC MAG Group, this is largely due to unabated demand from the business process outsourcing (BPO) industry. Currently the biggest job provider in the private sector, BPO industry revenue growth is now at a compound annual growth rate (CAGR) of 27.7 percent over the past 10 years. With U.S.-based firm Datamark ranking the Philippines number one on the list of BPO destinations in the world, McCullough predicts industry revenue will further increase. “Given this, we anticipate that 2016 will continue to be a landlord’s market, and that vacancy and rental rates will remain stable despite the increase in supply,” he states.
Bright Lights, Booming Cities
The Philippines’ sustained growth narrative seem to be significantly bolstered by the economic activities and development centered around the sister CBDs of Makati and Bonifacio Global City in Metro Manila.
It was in the 1940s when Ayala Y Compania (now Ayala Corporation) revealed its 25-year urban development program for the raw tract of land once known as Hacienda Makati. The runways of Nielsen Field, Metro Manila’s first airport in the 1930s, were turned into the CBD’s main thoroughfares of Ayala Avenue and Paseo de Roxas. Transitioning from the mansions and villas in the tree-lined residential enclaves of Forbes Park and San Lorenzo, the city grew dense with office towers, condominiums, hotels and commercial centers organized around the neighborhoods of Salcedo and Legazpi. A greenbelt of parks and the massive Glorietta mall complex arose to anchor this full-service CBD.
Today, 40 percent of the country’s top multinational and homegrown corporations hold their headquarters within the city, solidifying Makati’s position as the country’s pre-eminent business hub. As of third quarter 2015, Makati commands the highest office rental rate of PHP979.1 per sqm/month, PHP156.4 per sqm more than the Manila office market average of PHP822.7 per sqm/month.
Bonifacio Global City (BGC) in neighboring Taguig shares a similar history with Makati in that Ayala Land, Inc. also had a hand in its development. Approximately 240 hectares of Fort Bonifacio, a former military base, were turned over to the Bases Conversion Development Authority (BCDA) in the 1990s to be developed into Metro Manila’s latest showcase CBD. By 2003, Ayala Land, Inc. and Evergreen Holdings, Inc. entered into a landmark partnership with BCDA to develop and implement the masterplan for BGC.
Today, BGC is set to provide 51.8 percent of the approximate 1.8 million sqm of leasable office space expected to hit the market by 2018. This year, the new offices of the Philippine Stock Exchange will open in this bustling hub. The CBD boasts leading-edge architecture and facilities, brand-new five-star and business hotels, world-class retail and dining, and a balanced complement of cultural and lifestyle spaces, all ready to welcome discerning urbanites.
A report by Jones Lang Lasalle reveals net absorption within the Makati and BGC CBDs rose from 12,000 sqm in the second quarter to 86,400 sqm in the third quarter of 2015, mainly driven by outsourcing and technology firms, with Grade A developments continuing to enjoy high occupancy. While BGC adds more new towers to its skyline, Makati’s cityscape also undergoes upgrades and redevelopment, stimulating property activity. These CBDs have likewise been at the focus of government plans, in partnership with the private sector, for a slew of milestone infrastructure projects set to enhance transport connectivity and quality of life within and between these key hubs.