The office space sector, one of the bright spots of the economy, is expected to absorb over 1 million square meters of newly-built projects this year, a record in Metro Manila’s history.
“We see the strong demand being complemented by record-high completion of new office buildings across the country’s capital,” property consulting firm Colliers International Philippines said in a report.
It said the growth would be supported by strong demand from business process outsourcing companies, gaming firms and traditional offices.
It said the demand from non-BPO and traditional occupants, including government agencies, banking and finance, telecommunications, construction and logistics remained robust.
“The Philippine economy is projected to grow between 6.5 percent and 7 percent per annum over the next three to six years and this should help sustain the traditional firms’ demand for office space,” said Dom Fredrick Andaya, Colliers International Philippines director for office services.
Andaya said the robust growth reflected not just the sustained dynamism of the BPO-led services sector, but also the expansion of other key economic sub-sectors such as construction, telecommunications, banking and finance, warehousing and logistics and manufacturing.
Companies engaged in these businesses were compelled to expand and, thus, occupy larger and high-quality office space, he said.
Colliers said these traditional offices covered 34 percent of all transactions in the first half of 2018, or more than 250,000 square meters.
Major non-BPO deals in the first six months included state-led firms, fast-moving consumer goods, engineering, insurance, online shopping and logistics companies.
Colliers said the net take-up in Metro Manila in the first half already outpaced the full-year 2017 figure.
It said midway through 2018, it recorded a net take-up of 641,000 sqm, higher than 638,000 sqm posted in the entire 2017.
Colliers said it was expecting a little over 1 million sqm of net take-up for the whole 2018, the highest in Metro Manila’s history.
“We have observed that transactions in the first six months of the year remain diversified and Colliers believes that this bodes well for the Manila office sector in general,” Andaya said.
Offshore gaming companies are also driving the demand. In the first six months, offshore gaming firms accounted for 24 percent of total deals, taking up about 180,000 sqm of space.
Significant space was occupied by flexible space operators such as Figari, Clock In and Common Ground. This indicates the flexible space market in Metro Manila continues to thrive, according to Colliers.
Colliers said it was expecting at least 440,000 sq m (4.7 million sq ft) of additional office space to be delivered for the remainder of 2018, pushing the 2018 completion to a little over 1 million sqm.
It is expecting the completion of about 820,000 sqm (8.8 million sq ft) of new office space per year from 2019 to 2021. The Bay Area, Fort Bonifacio and Ortigas Center would corner the bulk of the new supply, it said.
Colliers said Metro Manila’s office sector was expected to post a 5-percent vacancy by end-2018. “Sustained demand should temper the impact of new buildings. Hence, we see vacancy hovering between 5.3 percent to 6 percent per annum from 2019 to 2021,” it said.
The consulting firm also projected vacancy of between 5 percent and 6 percent per year from 2019 to 2021. It said this should provide occupants with wider office space options to choose from.
Colliers said a 4.1-percent vacancy, which the Metro Manila office sector recorded after the 2009 global financial crisis up to 2016, hindered companies’ capacity to expand as they did not have an adequate choice of immediately available space.
Vacancy in the country’s capital remains tight at present, pushing offshore gaming companies to look for space outside Manila.
Offshore gaming firms are continuously expanding, looking for office buildings with large floor plates, it said.
Colliers thus encourages new and expanding offshore gaming companies to look for space in viable sites outside of Metro Manila such as Cebu, Pampanga and Laguna.