Manila office vacancies rise as pre-committed spaces open

More office spaces are now available in Metro Manila as some pre-committed office spaces have been reopened after expansion plans of business process outsourcing (BPO) firms were put on hold.

In its Q4 2020 Philippine Office and Investment Marketbeat reports, Cushman and Wakefield Philippines said overall Metro Manila office vacancy rates increased by 145 basis points to 7.8 percent, driven mainly by the continued flight of Philippine Offshore Gaming Operators (POGO).

Cushman and Wakefield said the re-opening of previously committed spaces in recently completed buildings due to indefinitely suspended expansion plans further pushed up vacancy rates.

“What is interesting to note is that there are some spaces that have been taken up in 2019 up to early 2020 in recently-completed or even under construction buildings that have been reopened, denoting that some pre-committed spaces have been given up as a result of expansion plans being put on hold indefinitely,” Cushman and Wakefield director and head of tenant advisory group Tetet Castro said.

“On the other hand, there has been an increased interest from companies looking at setting up their first local offshore operations in the Philippines due to our affordable occupancy and labor costs, but the materialization of such interest is dependent on how soon our local COVID situation improves,” Castro added.

The pent-up demand from IT-business process management (IT-BPM) companies is expected to be revitalized in the short-to medium-term.

Meanwhile, Cushman and Wakefield reported that prime and grade A Metro Manila office supply stood at 8.2 million square meters (sqm) at the end of 2020.

Total stock grew by 376,000 sqm, representing only 45 percent of the stock originally scheduled for completion last year.

“Of the estimated 1.4 million sqm expected to be completed in the next four years, over 509,000 sqm of projects have been pushed by at least six months, with over 169,000 sqm of which having adjusted completion dates of over two years from their respective intended completion dates,” the report said.

Average rents in Metro Manila declined by 0.1 percent to P1,027 per sqm in the fourth quarter compared to the previous quarter. The figure, however, is 2.31 percent higher than its year ago-level.

“The decline in average rents was mainly due to the downward adjustments in the asking rents of developments located outside of the main CBDs,” Cushman and Wakefield said.