Rising Makati, BGC rents push firms to Ortigas, Quezon City: CBRE

Rising occupancy costs in Metro Manila's prime business districts are driving cost-conscious companies toward alternative hubs such as Ortigas and Quezon City, according to CBRE Philippines. The consultancy also notes growing interest in managed facility arrangements and a shift toward smaller, more

Rising occupancy costs in prime business districts are pushing cost-conscious companies toward alternative commercial hubs such as Ortigas and Quezon City (QC), while also increasing interest in managed facility arrangements that can reduce upfront capital spending, according to real estate consultancy CBRE Philippines.

While central business districts (CBDs) remain preferred locations for many companies, some tenants are increasingly considering secondary submarkets with lower rental rates. “Makati Prime still commands the highest rate in Metro Manila, followed by Bonifacio Global City (BGC). So we’re still seeing demand in these CBDs, especially those occupiers who want to locate in prestige addresses,” CBRE Philippines Senior Research Analyst Angela Joyce Sumalinog said in an interview with BusinessWorld on Sept. 30.

“But then outside these areas, when we look at occupiers that are kind of price sensitive, they lean toward other sub-districts in Metro Manila, such as Ortigas, Quezon City, Alabang, Bay Area, wherein there’s still availability and the rents are noticeably lower compared to the Makati Prime and BGC Grade A buildings,” she added. Among the alternative office markets, Ortigas has been gaining traction, supported by a relatively newer building inventory, according to CBRE. The property consultancy expects Ortigas to post a single-digit office vacancy rate by yearend, joining Fort Bonifacio.

Ms. Sumalinog said Quezon City also remains an option for office tenants because of its supply of newer buildings, including spaces accredited by the Philippine Economic Zone Authority (PEZA), as well as available inventory from major developers. To manage higher occupancy costs and reduce upfront spending associated with traditional office fit-outs, some developers and occupiers are also turning to pre-fitted and managed facility arrangements. “On the developer side, we’re also seeing the rise of managed facility deals, especially now, which decreases capex (capital expenditure) and reduces financial risk for occupiers as well,” Ms. Sumalinog said.

The information technology-business process management (IT-BPM) sector continues to account for the largest share of office demand by volume, although individual transactions have become smaller. CBRE data showed that the IT-BPM industry accounted for 55 per cent of total office demand volume in the second quarter, while representing 28 per cent of total transaction count. Traditional companies accounted for 65 per cent of transaction count, although these involved smaller space requirements, according to CBRE.

“IT-BPM occupiers are taking less space per deal. So this year alone, we’re seeing the absence of mega deals… those around 15,000 to 20,000 square metres,” Ms. Sumalinog said. “In our observation, we’re seeing that occupiers are being more selective and strategic. So we’re hearing about right-sizing, short-term or provisional leases, staggered expansions, and less large block requirements,” she added.

Despite the IT and Business Process Association of the Philippines lowering its long-term industry revenue outlook, CBRE expects demand to remain supported by specialised segments such as global capability centres. “It is reshaping the type and mix of the IT-BPM companies need. We’re expecting growth of global capability centres, which are set up by multinational firms for them to handle their business operations internally,” Ms. Sumalinog said.

Office attendance in Metro Manila typically ranges from three to five days per week, while government policies continue to allow varying levels of work-from-home arrangements. In response to flexible work setups, office tenants are also reconfiguring workplaces away from fixed desk arrangements toward spaces intended for collaboration and shared use. “The regulatory environment here in the Philippines, like the PEZA and Bureau of Investments (BoI), they shifted towards supporting hybrid work rather than like mandating full return to office. For example, PEZA, they allow 50 per cent work-from-home arrangement for their registered business enterprise, while for BoI, it allows 100 per cent, even 100 per cent work-from-home arrangement,” Ms. Sumalinog said.