Real estate management firm Colliers expects a continuous increase in vacancy rates in Metro Manila’s office space market until the end of the year.
“Vacancy is still high because of the new buildings in the market—a carry-over effect from what we’ve been seeing due to the strong market performance in the pre-pandemic times,” said Colliers associate director for office services Kevin Jara.
The new work arrangements and relaxed conditions also contributed to a stale demand for office spaces this year, it said.
“While government and BPO industry forecast remain rosy, and we are now heading into positive office net take-up territory by the end of the year, we still think that there is no direct translation into a strong office market recovery in Metro Manila due to several recent factors, like the government allowing a path to 100-percent work-from-home,” said Jara.
Colliers’ quarterly report showed the vacancy rates were sustained by two considerable factors: the surrender of office space despite sustained transaction activity driven by new work set-ups and the new offices and buildings that are still in completion towards the end of the year or until 2023.
“As a result, we see that the vacancy rate is still climbing and even touching on the 20-percent mark in 2023. Because of the continued work-from-home trend and drive for provincial BPO growth, we think we’ll have to wait until 2024 to see a turning point in the Metro Manila office market,” said Jara.
The remote work set-up gave flexibility to the business processing outsourcing industry and advantages to those in the countryside.
“The contribution to the office space of this BPO growth is anywhere between 20 to 40 percent. That’s our estimate. Nonetheless, it’s mostly still a significant contributor to the office demand,” said Colliers senior director for office services Dom Andaya.
“It won’t be just solely in Metro Manila. It will be fifty-fifty. Fifty percent provincial, 50 percent Metro Manila,” said Andaya.
Colliers said despite the rising vacancy, it monitored 169,000 square meters of new office space transactions in the fourth quarter. Office transactions over the last nine months rose 72 percent.
Fort Bonifacio remained the fastest-moving market, with 140,000 sq. m. of new office space transactions in the first three quarters. The area posted an increase of 40,000 sq. m. in the last three months.
The Makati central business district followed with 83,000 sq. m. and now has a relatively higher vacancy rate than Fort Bonifacio.
“COVID is not a factor anymore in office leasing activity, so I think the industry, the office sector, has already outgrown the COVID challenges. There are other headwinds that we look out for. For example, the work-from-home and how it affects the real estate [market],” said Jara.