BGC office rents return to pre-global financial crisis levels

Strong demand from BPOs and expanding corporations to outpace supply of new office towers

MANILA, Philippines - Indicative of the overall health of Metro Manila’s office market, rental rates of prime Bonifacio Global City (BGC) office space appear to have fully recovered from the beating they took during the 2008 global financial crisis. In fact, office rents in most Metro Manila business districts are likely to continue rising in 2014 as strong demand from the business process outsourcing (BPO) industry outpaces the supply of new office towers, according to reports from Jones Lang LaSalle (JLL).

The global real estate services firm, which accounted for the majority of transactions in BGC in 2013, disclosed that as of January 2014, rent ranged from P700 to P900 per square meter in Metro Manila’s third largest business district. BGC office rental rates were pegged from P660 to P750 in 2008.

Sheila Lobien, JLL local director and head of Project Leasing, observed that the former military camp is now the preferred business district in Metro Manila as indicated by the total office floor area covered by pre-commitments. BGC accounted for 46 percent of a total 285,230 sqm. of pre-commitments signed as of the end of 2013. Quezon City came in second with 23 percent of pre-commitments while Makati registered 19 percent.

She pointed out that BGC projects offer strategic locations and operational efficiency, allowing developers to command top rents. 

A 26-storey tower along BGC’s main thoroughfare, W Fifth Avenue recently achieved the highest rental rate of P900 per sqm. 

W Fifth Avenue fronts a luxury hotel project and is a short hop from the entertainment destination of Bonifacio High Street. While most other developments are taken up by BPOs, W Fifth Avenue was able to attract many Fortune 500 firms relocating to BGC from Makati, accounting for 70 percent of its total office space.

W Fifth Avenue is a project of the W Group, Inc., the real estate vehicle of the Wee family, known locally and globally as a significant supplier of seaweed and carrageenan, a key ingredient in food and medicine manufacturing. W Fifth Avenue is the third in a series of boutique office buildings owned by the group which has become a key player in the office market of BGC in the last five years.

Lobien disclosed that, following the success of W Fifth Avenue which was fully leased four months before full building completion, the firm recently launched W CityCenter, a 29-storey project offering 55,000 sqm. of premium office space and four floors of retail to be completed in 2016. This early, the project is generating strong market interest.

Departing from the typical BPO building designed  primarily for efficiency, W CityCenter provides for higher ceilings, a grand lobby and landscaped balcony for every office floor. Fronting Bonifacio High Street and its retail destinations like a high-end cinema complex, the project will offer unobstructed views in addition to a superb location. 

Conceptualized by New York-based architectural firm CAZA, W CityCenter promises to be an iconic landmark in the BGC skyline. The four retail floors will provide the facilities and amenities for executives and employees in the upper floors and neighboring buildings, a definite attraction to prospective occupiers of W CityCenter.

W CityCenter also features large and efficient floor plates of 3,000 sqm. sought by BPOs. Its location on Seventh Avenue, a main thoroughfare of the district and walking distance to the transport hub of Market!Market!, likewise makes it BPO-friendly.

Lobien observed that the market today is buzzing as much as it did in the growth and expansion years of the 1990s when many of the prestigious Ayala Avenue buildings were constructed. She explained: “Many of the office locators then were Fortune 500 companies, and local conglomerates seeking to upgrade their corporate address. The economy is doing very well today and business is brisk.”

In addition to expansion requirements of top corporations, continued demand generated by BPOs locating in the Philippines have greatly improved the outlook of the office market today.  “We continue to see a surge in pre-committed office space, that is, space taken up even before building completion, an indication that the market will continue to be confident if not aggressive in the coming year,” said Lobien.