Quezon City's office market is still contending with weak demand despite holding a large inventory of relatively new, Philippine Economic Zone Authority (PEZA)-accredited space, property consultants said in their second-quarter assessments.

"Quezon City has the best product, but with barely any takers. [The district has] weak demand despite young stock, abundance of PEZA buildings, and availability held mostly by major developers," CBRE Philippines said in its second-quarter market report.

CBRE recorded 384,300 square meters (sq.m.) of office space in Quezon City, of which 55% remains unleased. About 46% of the stock is less than five years old, while major developers hold around 65% of total inventory. Roughly 83% of available office stock in the submarket is PEZA-accredited, according to the firm. That accreditation carries weight with occupiers because registered locators in economic zones qualify for fiscal incentives, so such buildings are typically geared toward export-oriented sectors rather than the broader office market.

Rents in the city edged higher during the quarter. Average rents in Quezon City rose 1.6% quarter on quarter to P688.80 per sq.m. per month in the second quarter from P677.90, according to Savills Philippines.

"Average rents appreciated 1.6% to P688.80 per sq.m. per month from P677.90, reflecting select repricing of premium space; the imminent supply expansion is expected to cap further increases," Savills said.

Savills identified Araneta Center Inc.'s Cyberpark Tower Three as the main contributor to take-up in the submarket.

"Cyberpark Tower Three contributed the bulk of absorption, leaving underlying demand across the wider stock closer to flat," it said.

Additional supply is expected in the second half of the year as SM Offices, the commercial leasing arm of SM Prime Holdings, Inc., delivers North Tower 3 within the SM North EDSA complex. The 22-story tower will add about 31,000 sq.m. of PEZA-accredited office space to the Quezon City market. The addition will land in a submarket where more than half of the existing stock is unleased.

The building will be directly linked to the upcoming North Triangle Unified Grand Central Station, which will connect Light Rail Transit Line 1, Metro Rail Transit Lines 3 and 7, and the Metro Manila Subway. It will also sit near the EDSA Busway Concourse and the EDSA elevated pedestrian walkway.

Meanwhile, Cushman & Wakefield said large leasing transactions have been occurring in secondary business districts as tenants pursue contiguous spaces, higher-quality offices, and more cost-efficient rents.

"BGC and Makati saw a slight increase in vacancy as traditional and IT-BPM sectors downsized or relocated their operations outside CBDs, opening opportunities for occupiers to establish or expand in CBDs. Large leasing transactions primarily occurred in secondary business districts as tenants pursue flight-to-quality strategies, contiguous spaces, and cost-efficient rents," the consultancy said.

Information technology and business process management (IT-BPM) companies — the export-oriented sector that has historically anchored demand for PEZA-accredited office space — have been among the tenants downsizing or relocating outside prime submarkets such as Makati and Bonifacio Global City (BGC), according to Cushman & Wakefield. — Juliana Chloe A. Gonzales