Office vacancy rates seen dropping this year
THE continued flight-to-quality and availability of higher grade office developments will drive vacancy rates downwards to 15 percent by end-2023, global real estate management firm Cushman and Wakefield (C&W) stated.
The firm continued that for the year 2022, the estimated total Prime and Grade A office supply in Metro Manila now stands at approximately 9.2 million square meters (sqm) and is expected to grow by another 0.53 million sqm within 2023.
“Despite the several global economic headwinds ahead, the Philippine IT-BPM (information technology-business processing management) industry is expected to significantly benefit from largescale lay-offs in tech companies. Mass job cuts among tech and startup companies have driven the demand for outsourcing and IT-BPM-related industries in order to further save up on operating costs,” C&W elaborated.
Additionally, Tetet Castro, C&W Tenant Advisory Group director and head, said that while market recovery continues in the fourth-quarter 2022, they see a possibility of a slight increase in average vacancy rates from the previous quarter.
“There will also be a slight dip in asking rents, primarily due to the addition of new stocks from new building completions as well as nonrenewal or early return of space by occupiers continuing their exercise of rightsizing or converting to a hybrid set-up. Nonetheless, overall vacancy rate for Metro Manila is forecasted to go down in 2023 partly due to the rekindled interest of multinational companies looking at setting up back-office or shared services operations in the country,” Castro explained.
“Allowing liberal work-fromhome arrangements for IT-BPM companies registered with the Board of Investments will favor further growth of flex spaces. A ‘hub-andspoke’ strategy will likely increase the demand for ‘plug-and-play’ office spaces which are readily available on short notice and with flexible terms,” Claro Cordero, C&W director and head of research, consulting and advisory services, noted.
Cordero concluded that the subpar demand growth will be more distributed in 2023.
“This will be due to new emerging urban districts outside the main CBDs (central business districts) in the Manila market continuing to gain traction due to decisions of several companies to operate in multi-sites through flexible workspaces,” he said.