Flexibility is key for building renters
In the 4th quarter of 2020, supply of office space in Metro Manila totaled 739,312 square meters (sqm), of which 57.59 percent or 425,778.83 sqm. remain leased, with available remaining supply at 313,533.17 sqm. From an average rent of P1,160/sqm in February 2020, the current value has gone down 3 percent to P1,120/sqm. A bigger drop in rental rates brought about by the exit of Philippine Offshore Gamings Operators (POGOs) was kept at bay due to the 1-year advance rent and deposit requirement. Renegotiated rental rates LRG expects renegotiated rental rates to remain at current levels or at by at least 10 percent. Highly affected will be the cities of Makati, Taguig, and Bay Area, which have had the highest asking rates for the past 3 years. The Grade A buildings in these CBDs have already shown an 8 percent to 11 percent decrease from their rental rates for the same period in 2020. The 3 major factors that affected rental rates in Metro Manila CBDs include closure of offices of many tenants, led by POGOs who exited the country in droves; the postponement of new and current companies’ start of operations and expansion plans; and the work from home arrangements that has effectively reduced the need for office space. Patience is a virtue LRG’s CEO Sheila Lobien noted office property owners in CBDs have learned not to force the issue and be patient with the current situation while most have slowed down some planned construction in anticipation of high vacancy rates and lower rental rates. Building owners have also become more flexible in their rental expectations and were actually giving rental discounts of as much as 20 percent to existing tenants and/or offering lower rents to new ones compared to pre-pandemic rates. Many were also offering office spaces fitted with furniture which were left in good condition by the previous tenants.