Property consulting firm KMC Savills has picked the Bay Area as its top investment bet for the office property segment in 2017, citing this budding district’s great potential to be Metro Manila’s next major business process outsourcing (BPO) hub after Makati and Bonifacio Global City.
The Bay area—referring to the vast land along Manila Bay that includes the Pagcor Entertainment City, the SM Mall of Asia complex as well as the Federal Land and Aseana estates—is projected to end 2019 with 862,400 square meters of Grade A office stock, thereby becoming the third largest office district in the National Capital Region next to BGC and Makati.
From a monthly rental rate of P650 a square meter in the Bay area today, rental rate may rise to P800 to P850 in the next three years, KMC Savills head of research Antton Nordberg said.
“It’s been growing by double-digit levels, although I think it will slow down a little bit and that’s also the key selling point,” he said, adding that the Bay Area was becoming a suitable location for those looking to expand their footprint but could not afford yet the steep price in Makati or BGC.
The average monthly rental rate in BGC today is around P889.9 a square meter while the comparative rental rate in Makati is P1,010.8 per square meter.
The vacancy rate in Bay Area is still tight at 0.9 percent in the third quarter of this year, a slight increase from 0.4 percent in the second quarter. Moving forward, KMC Savills expects the vacancy rate to marginally rise this fourth quarter with the expected addition of 37,000 sqms of new office supply from the Biopolis and iMet buildings.
The Bay Area is also seen to boost its stock of office space significantly this 2017, with a record 177,000 sqms of new space scheduled to be delivered, mostly from the office buildings of DoubleDragon Properties in the Meridian Park.
Although office demand has historically been robust, KMC Savills sees the scale of the incoming supply posing a tough challenge.
Thus, the property consulting firm expects the vacancy rate to slowly climb to double digits in the coming quarters, creating downward pressure on rentals over the short term.
But over a three-year period, KMC Savills sees rental rates in the Bay Area being lifted by large-scale infrastructure improvements, better accessibility that can tap the labor market in Parañaque and Southern Luzon alongside new entertainment and retail offerings from integrated resorts and regional shopping malls.
“It’s got a nice mix of everything—entertainment, retail, hotels, growing residential and commercial community,” Nordberg said.
Michael McCullough, managing director at KMC Savills, said there would be new developments happening all at the same time in the Bay Area.
He said the Bay Area was likewise in a good position to attract the “captives” or the in-house business process hubs of big multinational giants.
Among the big multinational names that have set up shop in the Bay Area are TeleTech, Telstra, ePerforma, VSI, Visa and Royal Caribbean.