Metro Manila office vacancy seen rising

MANILA, Philippines — Vacancy rate in the Metro Manila office market is forecast to reach as much as 14 percent this year as demand softens due to the pandemic and the exodus of Philippine Offshore Gaming Operators (POGO).

In a virtual media briefing, Lobien Realty Group (LRG) chief executive officer Sheila Lobien said the Metro Manila office market closed 2020 with a vacancy rate of eight percent.

“We feel that in the next few months, this can be double digit 12 percent to probably 14 percent vacancy rate… because many office buildings are being vacated. The exit of POGO affected the market’s vacancy rate,’’ Lobien said.

LRG expects a 25 to 30 percent decline in rental rates starting this year.

It said rental rate computations for 2020 “have not reflected the decrease due to the POGOs’ contractual agreements of about a year’s worth of security and advance deposits, which protected the landlords’ rent income during the lockdowns and despite the numerous lease pre-terminations.”

“The lockdowns, which resulted in many business contraction and closures, the flight of many of the POGOs and the prevailing economic situation in 2021 as a result of the COVID-19 pandemic are expected to increase office space vacancy rates and soften office demand this year,” it said.

Average rents in the Metro Manila office market closed at P1,120 per square meter in 2020, slightly lower than the P1,150 per sqm in 2019.

Business Process Outsourcing (BPO) firms led the demand drive for office space in Metro Manila in 2020, representing approximately 41 percent. Other industries accounted for about 43 percent of demand for office space last year.

In addition, gaming firms only accounted for 16 percent of office space demand in 2020, a sharp decline from the 36 percent share in 2019.

For this year, Lobien said around 600,000 to 700,000 sqm is seen to come online, lower than the pre-COVID level new office supply, which breached one million in 2018 and 2019.

Lobien said the delay in the completion of office spaces may also be good in a market where demand is slowing, as the available supply will be absorbed.