Office space take-up reaches nearly 300,000 sqm in 2023

Metro Manila office space net absorption more than doubled to 297,800 square meters (sqm) in 2023, driven by continued transactions mostly from traditional firms.

In its latest quarterly property report, Colliers said the 2023 net absorption is higher than the 110,500 sqm registered in 2022 and also exceeds its 220,000 sqm forecast for the year.

“Metro Manila office market performed better than expected compared to initial projections. Net take-up in 2023 more than doubled compared to the previous year, with transactions continuing to outpace lease surrenders,” Colliers Philippines said.

Data from Colliers showed that office space deals across Metro Manila reached 827,700 sqm, up 37 percent from the 603,800 sqm a year ago.

“This figure is already more than half the 1.5 million square meters recorded pre-COVID or in 2019. Traditional firms led transactions, accounting for 46 percent of total while outsourcing and POGO firms cornered 34 percent and 20 percent, respectively.

Colliers said the office space transactions were mostly expansions and relocations.

It added that the Bay Area, Quezon City and Makati CBD dominated transactions in 2023, accounting for more than half of the total transactions in the capital region.

Among the notable deals in the fourth quarter of 2023 include spaces occupied by Samsung in Fort Bonifacio, Foundever in Ortigas Fringe, Optum in Makati CBD and Fluor in Alabang.

“Colliers has also observed substantial deals from POGO firms especially in the Bay Area,” the professional services firm said.

For this year, Colliers is projecting office space take-up to further grow as it projects net absorption to reach 338,500 sqm.

“Colliers is optimistic that net absorption is to gradually improve in 2024 as we continue to receive inquiries for new setups, expansions, and relocations within and outside the capital region,” it said.

Aside from absorption, Colliers said the Metro Manila office market was able to avert reaching the 20 percent vacancy mark in 2023 as it closed the year at 19.3 percent.

“The office market has demonstrated remarkable resilience as it avoided reaching a vacancy of 20 percent,” Colliers Philippines director Kevin Jara said.

“To maintain its upward trajectory, emphasis must be placed on nurturing the growth drivers, particularly the education and upskilling of the labor force amidst technological advancement. As we forge ahead, the clarity and stability of regulatory framework and business environment remain critical in dictating the pace of office market‘s rebound moving forward,” Jara added.

For this year, Colliers projects Metro Manila office vacancy to reach 19.6 percent due to low pre-commitment levels in upcoming buildings and expected surrenders from pre-pandemic leases.