Slower office demand seen amid CREATE discussions — JLL

A DECREASE in demand for office space in Metro Manila may be expected as companies pause to await developments in the proposed changes to the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law, property consultant JLL said.

The business process outsourcing (BPO) sector, in particular, is taking a “wait-and-see approach” as it assesses the proposed amendments to the law that could influence its work setup, JLL said in its latest report.

“If enacted, this would allow BPO companies to implement full work-from-home schemes while retaining their tax incentives, prompting a reconsideration of their office space requirements,” the company said.

House Bill No. 9794, also known as CREATE MORE (CREATE to Maximize Opportunities for Reinvigorating the Economy), seeks to amend Republic Act No. 11534, or the CREATE law.

The measure seeks to permit domestic market-focused companies and exporters to maintain duty exemptions, value-added tax (VAT) exemptions on imports, and VAT zero-rating of local purchases as authorized by their respective investment promotion agency registrations.

The bill is set to be forwarded to the plenary for debates and discussions.

For the fourth quarter, BPOs accounted for the majority of the capital’s transaction volume in the office space.

Vacancy increased to 18% as the leasing market cooled, coupled with the additional supply introduced during the quarter. “A further uptrend in vacancy levels is expected in the first half of 2024, due to the substantial amount of upcoming supply expected to be introduced in the next two quarters,” JLL said.

Office rents stood at P1,122.1 per sq.m. per month, almost steady in the fourth quarter compared to the previous quarter due to “a sluggish office market.”

“A majority of the office buildings retained their rates, while selected developments opted to lower rents to stimulate demand,” JLL said.

With the most developments in the office sector, JLL said that developers would likely maintain their rents due to expected slower demand and rising vacancy levels.

“In contrast, prime developments with strong demand are likely to see rent increases, potentially lifting the overall market average,” JLL said.