Colliers: Average office space rent drops 30% in Metro Mla
COLLIERS, a leading real-estate services and investment management firm, said outsourcing firms and traditional occupiers should take advantage of office rents in major business districts as average office rents in Metro Manila dropped by as much as 30 percent compared to pre-pandemic rates.
“In our view, this should provide an opportunity for occupiers to implement flight-to-quality measures and move to core areas such as Makati CBD [Central Business District] and Fort Bonifacio,” said Colliers in its Research Review on Wednesday.
Meanwhile, Colliers said landlords should continue offering flexible leasing schemes such as rentfree periods, delayed escalations, longer fit-out periods and tenant improvement allowance to attract and retain tenants.
In a Property Market Report released in April, Colliers noted the increasing inquiries for flexible workspaces as occupiers implement their business continuity plans (BCP) and explore the viability of plug-and-play offices and swing (temporary offices) spaces for their employees.
The real-estate services firm recommended that occupiers look for new and high-quality workspaces in locations with substantial flexible workspace vacancies such as Makati CBD, Ortigas CBD and Fort Bonifacio.
The report reads that in the first quarter of 2022, Colliers saw 306,100 sq meters (3.3 million sq feet) of new office space coming online. The firm noted that this is more than double the 114,300 sq meters (1.2 million sq feet) completed in the fourth quarter of 2021.
In 2022, Colliers expects new supply hitting 821,900 sq meters (8.8 million sq feet), 30 percent higher than the 633,900 sq meters (6.8 million sq feet) in 2021.
“Some of the buildings due to be completed for the remainder of the year are: Makati Commerce Tower, Park Triangle Corporate Plaza, Filinvest Axis Towers 3 & 4 and SM Fairview Towers 2 & 3,” the report read.
From 2022-2026, the real estate services firm projects the annual delivery of 556,400 sq meters (6.0 million sq feet) of new office space. “We see the Bay Area, Fort Bonifacio, Quezon City and Ortigas CBD covering 64 percent of the new supply during the period,” added the report.
The report noted that Colliers recorded about 146,100 sq meters (1.6 million sq feet) of office deals in the first quarter of 2022, up from the 134,100 sq meters (1.4 million sq feet) in the fourth quarter of 2021.
“Traditional and outsourcing firms dominated office space takeup during the period. Some of the notable transactions in Q1 2022 include Facebook, Lazada, Arcadis, Orix and eperformax. These firms took up office space in Fort Bonifacio, Makati CBD and the Bay Area,” the report pointed out.
Colliers said it believes that traditional and outsourcing firms are likely to spearhead office absorption in 2022.
The Philippine Economic Zone Authority (Peza) required Information Technology and Business Process Management (IT-BPM) firms to implement a hybrid work model following 30 percent work-from-home (WFH) and 70 percent on-site scheme (previously a 90-10 percent ratio). This was after the Fiscal Incentives Review Board (FIRB) had denied Peza’s petition to extend the 90-10 percent ratio until the end of September 2022.
Meanwhile, a survey by the IT Business Process Association of the Philippines (IBPAP) showed that about 80 percent of Filipino employees prefer WFH over working onsite. The survey also revealed that 90 percent of employees are more productive in a hybrid model.
On 2023 rent projections, Colliers said that project office rents would see a 5-percent drop in 2022 before a recovery starting 2023, driven by some companies’ return-to-office (RTO) mandates.
As employers start to welcome workers back to the office, Colliers recommended that landlords offer spaces that protect their employees’ health and well-being.
“This may be in the form of occupying spaces in buildings which have Leadership in Energy and Environmental in Design [LEED], Building for Ecologically Responsive Design Excellence [BERDE] or WELL certifications,” the report read.