Office rents in BGC seen to continue rising in 2018 — Santos Knight Frank

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The skyline at Bonifacio Global City. BUSINESSWORLD FILE PHOTO

MANILA – More than three quarters of the total office supply projected to come online in 2018 are located in Bonifacio Global Center (BGC), as investors continue to flock to the central business district despite rising leasing rates, according to Santos Knight Frank, Inc.

The real estate services firm said on Wednesday it expects 946,782 square meters (sq.m.) of leasable office space to be added to the current office supply in 2018. Of this number, 76% or 409,377 sq.m. will be located in BGC.

Santos Knight Frank noted rental rates in BGC already breached the P1,000 per sq.m. mark as of the third quarter. At P1,027.27 per sq.m., BGC is the second most expensive place to rent office spaces after Makati central business district (CBD), where rental rates stood at P1,263.15 per sq.m.

“Rental growth in Metro Manila over the last 12 months have been the highest across Asia, due to the strong, continued demand in the office market. One thing is very clear, BPO (business process outsourcing) is sustainable,” Santos Knight Frank President and Chief Executive Officer Rick Santos said in a press briefing in Parañaque on Wednesday.

Leasing rates in the Bay Area, which covers the reclaimed land on Manila Bay, are also starting to pick up. As of the third quarter of 2017, rental rates in the Bay Area is the fourth highest at P725.43 per sq.m., next to Makati CBD, BGC, and Quezon City.

“We are seeing an emergence of the Bay Area, that’s being led by both BPO take-up and also the emerging online gaming industry,” Morgan McGilvray, director for occupier services and commercial agency at Santos Knight Frank, said.

By the end of 2017, the company expects more than 600,000 sq.m. of office space to be taken up, still driven by BPOs, which account for around 60% to 70% of the take-up. However, Santos Knight Frank noted this is a slightly lower share compared to previous years, as demand from gaming firms spiked to around 30% of the total take-up.

With this, Santos Knight Frank Senior Director for Research and Consultancy Jan Custodio noted gaming firms would be something to watch in the property sector in the following years.

“Because they have the flexibility of occupying any kind of space. So it’s just a matter of them fitting that space to their requirements. We’ve heard of gaming companies occupying old office spaces that are really antiquated,” Mr. Custodio said in an interview.

Mr. Santos, meanwhile, noted the demand for BPOs will continue despite concerns on the rise of artificial intelligence (AI) taking over most BPO jobs in the next few years. A 2013 study by Oxford University, for instance, noted that 47% of all jobs are at risk in the next 50 years due to computerization.

In the Philippines, however, Mr. Custodio said the effects of AI has been very minimal so far, and would unlikely make any significant changes in the near future.

“For one thing we don’t have the infrastructure for that yet. Internet connection, we all know the state here is not that good yet. And AI is reliant on that kind of connectivity. So that being said, not really that much unless something drastic happens. But not in the near future,” Mr. Custodio said.