One of the advantages of working with office-focused brokers is they know what is the going closing rates vs. published rates when it comes to rent. Take for example, we found out that one tenant currently negotiating a renewal of his contract in one of Makati's premium buildings was offered a renewal rate of PHP 1,400.00/sqm while upon checking, the building manager of that property just sent us their current published rate which is at PHP 1,200.00/sqm. Obviously, with the big difference in starting points, the chances of getting favorable closing rates are those with office brokers. Although of course, it will be quick to generalize landlords who practice such questionable gestures, it will still be more sensical to trust office brokers to handle negotiations and give you insights into the current market situation. Office brokers after all will have access to data that can be useful when it comes to the negotiation table.
Our Insights
Vacancy rates for office spaces are still high compared to pre-COVID rates. Metro Manila is averaging 20% vacancy, and this alone should be enough basis that rental rates should not be the same as pre-COVID. It's a simple demand vs. supply argument.
Office space tenants are due to a reshuffle. Current occupiers will most likely be the same and new occupiers will only take a small portion of the upcoming new take-ups. This creates opportunities for tenants as landlords compete for the movement of inventory.
Office occupiers are also struggling with current productivity given the WFH dilemma and will need better office spaces to motivate their workers to come back to the office. Similar to New York's current CRE problem, businesses struggle to ask their employees to come back to aged offices with little to almost no amenities as workers prefer the comfort of their own homes now. Not to mention of course the inconvenience of commuting.
For office occupiers to battle the productivity problem, it only makes sense to use the vacancy factor to negotiate with landlords. Assuming landlords would like to sustain office space take-up, businesses need to strive. To put it simply, both landlords and tenants must work together to bring back the workforce back to the office.
Rent is of course the number one factor. Some, however, are keener to get better spaces if they were to retain the rate they are paying.
Conclusion
To ensure that your business is getting fair-market rental rates, it would be ideal to get an assessment regularly with your broker. Currently, depending on the location, but let's say you are in Makati or BGC, and you are paying -/+ PHP 1,000.00/sqm but you are not in a premium building, we suggest to re-assess your options. With new office developments in the market, you might be better off transferring your operations into a better building. Should you wish to stay and avoid the hassle of relocating, the next best step is to renegotiate your terms.
How We Can Help
Assessment
If you would like an assessment of your current real estate cost versus market price, we can help by giving you a financial overview. This will help you better see if you are currently overpaying or you are getting your money's worth.
Planning Should the conclusion be the need to relocate your space, we will provide you with the entire planning of your office space set-up. As this is a big project, it is crucial to hire experts to guide you to ensure you avoid common pitfalls.
Execution
We provide you a comprehensive list of suitable options that match your needs. We exhaust the market availability ensuring that all properties are considered fairly. We further help you with negotiations for your shortlisted properties and we help you review proposals and contracts.
Advantage
Compared to doing things on your own, having an office-focused broker will help you save time in gathering information and relevant data to better decide for your business.
Set up a free consultation with our team. You can send us an inquiry through the button below.
You can also call us through the following numbers below:
Direct Lines: +632-853-808-33 Ext. 34-36
Mobile/Whatsapp/Viber: +63917-110-62-31
Data Source: KMC Research
Metro Manila vacancy rates have almost flatlined at 20% since 4Q 2022.
Makati has slightly improved its vacancy from 4Q 2023 to 1Q 2024 but is still high at above 10%.
BGC jumped to 13.70% vacancy rate by the end of 1Q 2024 as new supply came in -- Uptown Eastgate in Uptown BGC.
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