By James A. Loyola
Real estate services firm KMC Savills, Inc. reported that Megaworld Corporation supplied a majority of office developments in 2018.
In a study, KMC Savills said Megaworld “strengthened its position as it effectively controlled office space leasing nationwide. The developer is forecasted to expand its portfolio by 1.5 million square meters of gross leasable area by 2020.”
Last year, Metro Manila saw 746,900 square meters of new Grade A office completions – roughly the same amount recorded in 2017. Net absorption was significantly higher at 701,100 sqm in 2018 compared to 615,200 sqm in 2017.
As such, overall vacancies were kept at just 4.8 percent of stock – slightly higher than the 4.5 percent vacancy rate the previous year.
Rents in the capital had accelerated further, hitting 5.0 percent year-on-year in the fourth quarter of 2018.
With the Metro Manila office market's good start in 2018, developers are poised to further expand their office portfolios.
The country's top four developers – Ayala Land, Megaworld, SM Prime Holdings, Robinsons Land – spent a total of P273.0 billion for capital expenditures last 2018.
“We estimate that close to a tenth of this amount has been disbursed for office development alone,” KMC Savills said.
At the end of 2017, the Big Four had a total of 3.1 million sqm of office GLA and earning as much as P19.9 billion of leasing revenue during the same period.
Megaworld leads the country's top developers, in terms of effectively controlled office space nationwide.
In comparison, Ayala Land has a comparable office stock when consolidated with its various subsidiaries and associates. However, due to varying ownership structure, the premier developer has a diluted economic interest over their consolidated office portfolio.
These developers have cornered a significant share of the office market due to their strategy of developing mixed-use townships in Metro Manila and in the provinces.
Both players are expected to expand their portfolio to as much as 2.6 million sq m of GLA by 2020 - with Megaworld taking the clear lead with 1.5 million sq m.
In total, the Big Four is forecast to complete an unprecedented office stock of 4.3 million sqm of GLA by 2020.
“We still expect Megaworld and Ayala Land to lead all other players in the office leasing market in the coming years. In addition, demand for office space is still projected to be sustained given the additional boost from the POGO sector,” the study said.
It noted though that, “although the Big Four will still dominate a significant chunk of the market, we anticipate an increase in competition in the next decade.”