The office vacancy rate in Metro Manila hit 14.4 percent in the third quarter, matching the level in the fourth quarter of 2009, widely-considered as the bottom of the real estate market down cycle precipitated by the global financial crisis, real estate services firm Cushman & Wakefield said in a report Wednesday.
“The overall vacancy rate in Metro Manila is almost similar to levels last seen during the global financial crisis and is expected to even breach the all-time high figure recorded 12 years ago,” said Tetet Castro, director and head of tenant advisory group at Cushman & Wakefield.
Some major markets are even demonstrating over 25 percent vacancies already as offshore gaming companies continued to return large amounts of office spaces. Demand from the BPO sector is expected to start filling in spaces again as early as the middle of next year, with a number of prospects particularly interested in taking up fitted spaces vacated due to the pandemic, according to Castro.
Claro Cordero Jr., head for research, consulting and advisory services at Cushman & Wakefield said the delayed resumption of full business activities continued to push the vacancy rate in the office sub-sector upwards while the average asking rate modestly declined as major office space operators, primarily in the CBDs, held onto their pre-pandemic asking rents.
“The global spread of the highly-contagious COVID-19 Delta variant also severely affected the economic performance of various Southeast Asian countries, prompting lower economic forecast in the region. While slower economic growth is projected by end-2021, recovery is expected by 2022 provided the recurring spike in the number of infections – due to the slow roll-out and highly-uneven inoculation program across the region is effectively managed,” Cordero said.
Data showed that the unoccupied spaces in developments completed within the first quarter to third quarter this year in Metro Manila accounted for 22 percent of the total vacancies.
“The vacancy rate is anticipated to swell further as the amount of space vacated by major tenants still outweigh the total space taken up in the market. The exit of offshore gaming operators continues to drive the increase in vacant spaces in Metro Manila. Pasay City, where majority of the offshore gaming operators were located, has over 62,000 square meters of office spaces that have been vacated,” the real estate advisor said.
Net absorption in the third quarter reached negative 40,000 square meters, bringing up the running annual total to negative 140,000 sq. m. as of end-September.
The average prime and Grade ‘A’ asking rent in Metro Manila closed at P1,047 per sq. m. per month, a decline of 1.8 percent quarter-on-quarter and 3.3 percent year-on-year. More developers made further downward adjustment in the published rates for some developments in Metro Manila. Average rents in established CBDs such as Makati and BG were more resilient, as majority of the developments which exhibited huge spike in vacancy rates were in the emerging business districts.
Cushman & Wakefield said that in the short-term, one of the downside market risks would be the escalating vacancies, as firms remain cautious and may even be forced to right-size their space requirements.
It said that over the long-term, office space demand was expected to normalize as space density expanded to address prescribed health protocols amid the blended or hybrid workforce arrangement.