Crisis cuts demand for office space

THE global credit crisis triggered in the US has cut demand for office space in the Philippines, according to the local unit of CB Richard Ellis Group Inc., the world’s biggest commercial property broker.

New office space taken up by providers of outsourced business services, including call centers, fell to 225,000 square meters last year from 330,000 square meters in 2007, the broker said.

“The financial unraveling in the US has forced most companies to delay expansions or seek more cost-efficient locations, at least in the near term,” CB Richard Ellis Philippines chairman Rick Santos told reporters yesterday.

“Nobody knows for now if this year’s take-up will be bigger than last year.”

Shares of builders such as Ayala Land Inc. and Megaworld Corp. more than tripled in value in the five years ended 2007, partly due to rising office demand fueled by the expansion of call centers and outsourcing companies such as Convergys Corp.

Last year, the Philippine Stock Exchange Property Index plunged 58 percent on concern local real estate would not be spared from the worldwide recession.

Last year’s demand was short of the 360,000 square meters that Philippine developers built, creating an oversupply of 135,000 square meters, according to Joey Radovan, vice chairman at the Manila office of CB Richard Ellis.

“From a very conservative outlook, it could take a year for the market to absorb this excess space,” Radovan said.

“Planned additional office buildings should be delayed to early 2010.”

Weaker demand caused lease rates to fall between 20 percent and 25 percent, to P1,000 a square meter last year, said Trent Frankum, CB Richard Ellis general manager.

Out of the 96,000 condominium units that will be built in Manila and its neighboring cities from 2008 through 2014, about 72 percent had already been sold, he said. — Bloomberg, Manila Standard Today