Global firms fuel record surge in Manila office space

GRAPHIC: New (KOSDAQ: 160550.KQ - news) office space: http://link.reuters.com/pyn24w

By Neil Jerome Morales MANILA, Feb 25 (Reuters) - Supply of new office space in Manila is set to break records for the next few years as developers scramble to satisfy demand from global firms such as Google (Xetra: A0B7FY - news) and HSBC looking to outsource business processes to Asia's second fastest-growing economy.

Developers added 466,354 square metres (sqm) of office space last year, near the all-time high of 467,030 sqm in 2009, Colliers International Philippines said in a report this month. That's almost equal to the floor area of two Empire State Buildings and enough for tens of thousands of employees. A total of about 1.85 million sqm of office space is expected to be added between 2015 and 2017 in the Makati, Bonifacio Global City, Ortigas and Quezon City business districts in Metro (SES: E1:M01.SI - news) Manila, according to Colliers.

More than half of the supply entering the market this year had been leased as of February, Rick Santos, chairman of property services firm CBRE Philippines, told Reuters. Lower operating costs and an English-speaking workforce have lured firms such as Google, Accenture (NYSE: ACN - news) , Citigroup , JPMorgan (LSE: JPIU.L - news) and HSBC to relocate some of their business processes to the Philippines.

The demand for office space has boosted average lease rates in the capital by 8 percent to 816 pesos ($18) per sqm as of the end of 2014, compared with a 4 percent gain in 2013, data from CBRE Philippines shows. Meanwhile, the vacancy rate in business hubs in Manila - the No.2 outsourcing destination after Bengaluru according to strategic advisory firm Tholons - fell to 4-5.5 percent in 2010-2014 from 9 percent in 2009.

Local property players Megaworld and Ayala Land (Other OTC: AYAAF - news) , whose shares have soared by more than a third in the past year on the local bourse, are ramping up supply. "We have close to 200 tenants in our portfolio, so we already know their growth requirements, and that prompts us to create the supply," Megaworld Senior Vice President Jericho Go told Reuters. "We don't foresee a major risk." ($1 = 44.1500 Philippine pesos) (Editing by Ryan Woo)