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SCMP Reporter

More than 13 million square feet of office space is expected to come on to the market in Manila's two main business districts in the next four years.

  If all the projects are built as planned they spell a 61 per cent increase in office space in the Makati central business district (CBD) and a 103 per cent increase in the decentralised Ortigas Centre area.

  That does not take into account another four areas which developers and the government want to turn into decentralised business-cum-residential zones.

  The aim of the zones is to take pressure off Makati, which suffers from poor infrastructure and heavy traffic congestion.

  Some sceptics have questioned the need for such a massive increase in office construction, considering the economy's lacklustre track record in the past 20 years, and doubt whether it will be built.

  Other analysts are more upbeat, arguing that the past is a misleading barometer of the Philippines' newly energised economy.

  'If you look at the historic take-up, the figures are misleading,' said Jones Lang Wootton (JLW) director Peter Small.

  'In Makati, they are going to increase the new stock by 60 per cent but they're going to take out 30 per cent of the old stock.'   According to JLW's figures, the bulk of this construction will hit the market in 1998 and 1999 when about eight million sq ft of office space will be completed in Makati.

  In the Ortigas Centre area, JLW has calculated that developers will put up about one million sq ft both next year and in 1998, with a further four million scheduled for construction in 1999.

  Analysts say the strongest impetus for the new building activity is the economic liberalisation measures introduced by the Ramos government and the need for other Asean (Association of Southeast Asian Nations) countries to find cheaper centres of manufacturing.

  JLW figures show 400 Japanese companies in the Manila area, most of which require grade A offices.

  The explosion in construction is being aided by a government which is taking the wraps off the Philippine economy and liberalising areas such as banking, insurance, financial services and the oil industry.

   In the banking sector, for instance, where once there were only four main banks, liberalisation measures have enticed 10 major banks to move to the Philippines.

  JLW's Monique Pronove, senior manager, research and consultancy, said this construction was also justified because the existing stock was too old to meet the requirements of companies.

 With the economy growing at more than 5 per cent, JLW officials said local companies would be keen to expand and would leap at a chance to move into the new buildings.

  Finally, there is the vacancy rate in the prime CBD area. According to Mr Small, the vacancy rate has fallen from 2 per cent to 1.5 per cent, meaning that any company would be hard pressed to find more than 10,000 sq ft for lease in the Makati area now.

  He and other analysts admit that while rents in the Makati area should remain firm, the same cannot be said for the Ortigas Centre.

   Mr Small predicted that rents - which are half that of Makati's at about 340 pesos (about HK$100) per square metre or 31.58 pesos per sq ft - would remain soft.

  Any serious over-supply problems would be corrected by developers themselves.

    In the Philippines, developers already owned the land and did not need to borrow from banks to fund construction.

   If there was a glut of space coming on the market, they could simply stop building, he said.

  Mr Small said the other four decentralised business districts would cater for different industries, such as manufacturing, which would allow offices to be set up near the plant.

  'Manufacturing is not going to go into Makati,' said Mr Small. 'It can go to other precincts.

  'You have manufacturing centres and industrial centres and they need some office development as well.' 



Makati over-building fears dismissed