Office take-up in Metro Manila rises in H1

The first half of 2022 saw a positive net office space takeup, indicating a strong tenant transaction in Metro Manila amid the rise of hybrid work setups.

In its recently released quarterly report, Colliers Philippines recorded a 62-percent hike in office transactions to around 325,100 square meters (sq m) in January to June from last year’s 200,700 sq m.

For the second quarter alone, deals reached 165,200 sq m from 159,900 sq m a quarter ago, notably in Makati, Bay Area, Fort Bonifacio, and Ortigas.

Net absorption from May to June 2022 continued to improve to 45,100 sq m, the highest since the first quarter of 2020.

Complete new office supply was halved to 146,700 sq m in the second quarter of this year from the previous quarter’s 306,100 sq m.

Per the study, vacancy has reached 17.7 percent from 17.3 percent, as average rents decreased by 2.6 percent from 3.1 percent quarter-on-quarter.

Overall, the strong office demand could be attributed to increasing work space requirements of both the traditional and outsourcing companies, with their rent to own or RTO implementation and pursuit of expansion plans, respectively.

Colliers expects them to still lead the office space take-up for the remainder of 2022 as the impending threat of a global recession is likely to compel American firms to outsource their services from the Philippines.

Likewise, it sees the peso depreciation as a magnet that will attract offshore businesses to the Philippines.

The diversified professional services and investment management firm retains its projection of a 350,000-sq m net absorption from a -273,100 sq m year-on-year.

It projects a new office space inventory of 356,200 sq m that will be delivered by end of the year, 65 percent of which will come from Makati and Ortigas.

The substantial completion of 808,900 sq m of space will cut unoccupancy rate to 18.2 percent come yearend from 15.7 percent in 2021.

Rents are generally projected to go down to 6 percent compared to the 12 percent correction last year.

According to Kevin Jara, associate director for office services-tenant representation at Colliers, they expect the market to recover gradually.

With this, he urged landlords and occupants to capitalize on the growth momentum by assessing hybrid work arrangements that will back up their operations and to take advantage of opportunities brought about by the tenants’ market.

he also asked them to clarify concerns on investment promotion agency transition and incentive qualification and to provide flexibility on office handover conditions depending on tenant preferences.