Office space takeup remains robust in Q2  

MANILA, Philippines — The Metro Manila office market continued to see a positive net takeup in the second quarter of the year, mainly driven by demand from outsourcing and traditional firms, property consultancy firm Colliers Philippines said.

In its quarterly briefing, Colliers said net absorption in the second quarter improved to 45,100 square meters, the highest since the first quarter of 2020.

Colliers earlier reported that the Metro Manila office market registered its first positive net takeup after seven consecutive quarters of negative net absorption in the first quarter with a net takeup of 26,400 sqm.

“Colliers Philippines has recorded two consecutive quarters of positive net office space takeup. This indicates that Metro Manila transactions are holding firm despite the popularity of hybrid work arrangements, and we project sustained absorption for the remainder of the year,” the firm said.

With the continued positive takeup, Colliers said office space takeup is seen to hit 350,000 sqm this year, an improvement from the  −273,100 sqm in 2021.

“Coming from the positive results of the last two quarters, we expect the cadence of office space transactions to be sustained until the end of the year, supported by a robust return of outsourcing demand, strengthening US dollar and the improving Covid situation,” Colliers Philippines associate director for office services-tenant representation Kevin Jara said.

Colliers reported that around 325,100 sqm worth of office transactions were recorded in the first half,  62 percent higher than the 200,700 sqm in the same period a year ago.

“Colliers is starting to see a pickup in demand for office space as more traditional occupiers implement RTO (return to office) and outsourcing firms pursue their expansion plans,” the company said.

Notable transactions during the period involved companies such as BPI, Telus, Inspiro, Standard Chartered and a logistics company,  Colliers said.

These firms took up space in Makati CBD, Bay Area, Fort Bonifacio, and Ortigas Fringe.

“In our opinion, traditional and outsourcing firms are likely to lead office space take-up in 2022 as the impending threat of a global recession is likely to compel US firms to outsource their services from the Philippines,”Colliers said.

It said the depreciating Philippine peso should also make the country an attractive option for outsourcing firms.

Apart from outsourcing and traditional firms, Colliers noted that there were also two huge transactions from Philippine Offshore Gaming Operators (POGOs) in the first half.

This comprises 11,000 sqm worth of office space in the Bay area and 12,000 sqm in the Makati fringe area, particularly in Circuit Makati.

Meanwhile, Colliers reported that completed new office supply totaled 146,700 sqm in the second quarter, lower than the previous quarter’s 306,100 sqm.

For the remainder of 2022, Colliers projects the delivery of 356,200 sqm of new office space. Makati Fringe and Ortigas CBD are likely to cover 65 percent of the remaining supply. Among the buildings due to be completed are Makati Commerce Tower, PMI Tower, Studio 7, SM Fairview Towers, and Corporate Finance Plaza.

From 2023 to 2026, Colliers forecasts the annual completion of about 543,300 sqm.

Metro Manila office vacancy further grew to 17.7 percent in the second quarter  from 17.3 percent in the first quarter.

“Colliers recorded no substantial increase in vacancy in Q2 2022 as new supply was halved to 146,700 sqm from the 306,100 sqm completed in Q1 2022 and supported by greater office transactions in Q2 where deals reached 165,200 sqm from 159,900 sqm quarter ago,”Colliers said.

By the end of 2022, Colliers estimates vacancy will reach 18.2 percent from 15.7 percent in 2021 due to the substantial completion of 808,900 sqm.