Manila still third most cost-effective for prime office rent in Asia-Pacific

MANILA remained the third most reasonably priced city for prime office rents within the Asia-Pacific region within the third quarter, based on real estate consultancy Knight Frank.

On an annual basis, Manila’s occupancy cost fell by 1.7%, barely below the typical 2.5% decline within the region, a Knight Frank Asia report released on Oct. 22 showed.

The common prime office cost in Manila was $29.64 per square foot (sq.ft.) within the July-to-September period.

“Prime rents within the region fell just 0.1% on a quarter-on-quarter basis, signaling that rents may very well be bottoming out, supported by growth in Indian markets,” Knight Frank said.

Kuala Lumpur had the bottom average prime office rent within the region at $20.57 per sq.ft., followed by Jakarta with ($26.75), Phnom Penh ($34.13), Guangzhou ($35.60), and Bengaluru ($36.17).

The most costly rent for prime office space was in Hong Kong SAR ($155.52), followed by Singapore ($125.66), and Sydney ($99.75).

Knight Frank expects Manila to see a decline in rents in the following 12 months, together with Bangkok, Beijing, Guangzhou, Hong Kong, Shenzhen, and Shanghai.

Cities that can see higher rents in the following 12 months include Brisbane, Perth, Ho Chi Minh City, Singapore, Taipei, Seoul and Sydney.

The common prime office emptiness rate within the Asia-Pacific region slipped by 0.2% quarter on quarter to 14.8% within the third quarter, ending consecutive quarterly increases because the second quarter of 2022.

Manila had the 11^th highest prime office emptiness rate within the region at 14%. Kuala Lumpur had the very best at 27%, followed by Shenzhen (25.1%), Jakarta (24.9%), Bangkok (24%) and Shanghai (21.1%).

Knight Frank said firms across the region are keeping a detailed eye on costs amid slower economic growth and geopolitical risks. It noted that leasing sentiment will likely take successful as firms curb spending.

“Global economic uncertainties have led to more cautious capital expenditure strategies amongst occupiers, favoring renewals and consolidating office footprints,” Tim Armstrong, Global Head of Occupier Strategy and Solutions said.

Firms that relocate their offices normally go for smaller spaces, “aligning with cost mitigation needs and the growing acceptance of hybrid work models,” he added.

“While the business sentiment may improve because the Fed eases monetary policy, demand will proceed to be tempered by prudent spending and workplace strategies focused on maximizing space utilization,” Mr. Armstrong said.

Knight Frank said the Asia-Pacific prime office sector will still be “tenant favorable” this 12 months. With the delivery of around 12 million square meters (sq.m.) this 12 months, the pipeline supply next 12 months will likely drop by about one-fifth.

“Nonetheless, as the event peak within the region subsides, any significant uptick in leasing activity could rapidly tighten the supply of prime spaces. This scenario may speed up the flight-to-quality trend as tenants seek to upgrade their portfolios in a potentially more competitive market,” Mr. Armstrong said. — Aubrey Rose A. Inosante