Manila office market likely to fully recover in 18-24 months — Cushman

THE METRO MANILA office real estate market is expected to fully recover in 18-24 months, according to real estate services firm Cushman & Wakefield.

“The return to full recovery trajectory of the commercial real estate market will likely take place in 18 to 24 months, depending on the speed of take-up of vacant and newly completed office spaces,” Claro dG. Cordero, Jr., director and head of research, consulting and advisory services at Cushman & Wakefield, said in an e-mail on Sept. 16.

He cited risks like the West Philippine Sea conflict, La Niña, sticky inflation, and higher-than-average interest rates.

“We will likely see an improvement in the office real estate’s vacancy rate and net absorption in the third quarter of 2024,” Mr. Cordero said.

He said Metro Manila’s commercial real estate market is expected to grow by another 100,000 square meters next quarter.

“The slower-than-expected recovery of the global economy from the cumulative effected of higher interest rates and inflation forming pressure on the growth of consumer and business confidence affecting the growth of office space demand from global companies,” he said.

Mr. Cordero said lower local interest rates will likely boost demand in key property market segments.

The Bangko Sentral ng Pilipinas (BSP) on Aug. 15, cut its policy rate for the first time in almost four years by 25 basis points (bps) to 6.25% from a 17-year high of 6.5%.

“The unexpected reduction in key policy rates will likely force more positive forward-looking market expectations of monetary policy stance,” he said.

Mr. Cordero added that the BSP’s decision will boost business and investor confidence.

Headline inflation eased to 3.3% in August from 4.4% in July, as food and transport costs growth decelerated, staying within the central bank’s 2-4% target for the year.

In its previous report, the firm said Prime and Grade A offices overall vacancies in Metro Manila fell to an estimate of 15.2% by the end of the second quarter.

This was 167 bps lower than the reported vacancy rate of 16.9% in the same quarter the previous year. — Aubrey Rose A. Inosante