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Updated: January 14, 2016

Key trends that will shape PH office real estate

Sustainability and redevelopment are some of the factors that will propel local real estate, says KMC MAG Group

Over the past couple of years, the Philippines has seen quite a tremendous leap forward, particularly in the real estate front. Many experts, including commercial real estate specialist KMC MAG Group, believe that the country’s economy might be strong enough to continue its current streak, despite outside threats, particularly the dip in demand from China.

To ensure that the local office real estate will maintain its momentum in the coming years, KMC MAG proposes focusing on these three factors.


Sustainability will increase office take-up

Not all property developers are making sustainability a priority in constructing buildings, although KMC MAG believes it is beginning to be more of a need than a premium offering.

“In this day and age, developers can no longer look at green buildings as a premium offering. Developers need to look at green buildings as a key component of their medium- to long-term strategy. They need to consider how this concept can be applied to lower-end offerings, so that multiple customer bases will actually benefit from sustainable spaces,” KMC MAG Managing Director Michael McCullough explained.

KMC MAG cites several advantages to going green in real estate, such as providing employees with a healthier workplace and increasing cost-efficiency. Buildings that meet the specifications of sustainability groups like the Leadership in Energy and Environmental Design, or LEED, are seen as more attractive to multinational corporations, which means investors will be able to increase their rental rates.

Makati and Bonifacio Global City are the leading locations when it comes to LEED buildings, supplying Metro Manila with 22 structures that have either been pre-certified as LEED, or are applying for LEED certification.

Bonifacio Global City

Redevelopment is a driving force for the office property market

Makati is said to top average monthly rental rates in Metro Manila currently at Php979 per square meter. And updating existing office buildings, according to KMC MAG, will help justify the increase in asking prices even more not just in Makati but in all central business districts in high demand.

“Redevelopment will help revive a building and make it more attractive to organizations or businesses looking for spaces in high-demand business districts like Makati,” McCullough said. “Moreover, redevelopment can also increase the value of surrounding properties. We see redevelopment as a way for the Makati CBD to stay competitive and hold its own against emerging CBDs such as Bonifacio Global City.”

The construction of JAKA Tower, located along Ayala Avenue, was halted during the 1997 Asian financial crisis, leaving only 21 of the 49 planned levels finished. Ayala Land has since taken over, and will soon give the building new life as the Alveo Financial Tower, opening up 37,138 sqm of leasable space by 2020.

Found at the corner of Ayala Avenue and Paseo De Roxas is the Insular Life Building, a 54-year-old structure that is similarly undergoing redevelopment. When reintroduced near the end of 2016, Insular will offer 19,156 sqm of leasable space that can demand a monthly rate of up to Php1,400 per square meter from its previous rate of Php600 per square meter.

Provinces will take the spotlight

With the continuous boom of the information technology–business process outsourcing (IT-BPO) industry in the country, multinational companies no longer see fit to confine their businesses solely to Metro Manila, choosing to explore their options by going provincial. Next Wave Cities, as these locations are being referred to, are defined as BPO-centric locations in provinces, places that have what it takes to sustain the BPO industry such as manpower and telecom infrastructure.

Financial industry giants JP Morgan and Wells Fargo are said to be looking at Davao and Clark, respectively. Business services and document technology products brand Xerox Philippines is considering Nueva Ecija. Other cities that could possibly see growth in the economic landscape over the next few years are Bacolod, Iloilo, Baguio, and Santa Rosa.

On the other hand, success in these areas will not come easy, KMC MAG implies, as there is still a need to ensure that infrastructure will be improved, and that there will be a good talent pool to fill the jobs to be created. They suggest providing a stronger incentive for developers and locators who are interested in moving their businesses beyond the metro, as well as putting money into education and training programs to support manpower needs.

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