Demand for office space projected to grow by 8%

Metro Manila office property developers continue to reduce reliance on the business process outsourcing (BPO) to fill up space in new buildings while offshore gaming firms and other non-BPO companies keep the market buoyant, property consulting firm Colliers Philippines said.

In its second quarter Philippine property market briefing yesterday, Colliers reported that net office take-up in the metropolis hit 190,000 square meters in the second quarter of the year, with a slight improvement seen in BPO demand.

From a share of 21 percent of total transactions in the first quarter, BPO demand rose to 31 percent by the end of June. Offshore gaming firms accounted for 30 percent while the remaining 39 percent same from traditional companies, including government agencies.

“In a nutshell, you have a slight rebound from BPOs, but it’s still a diversified tenancy mix,” Colliers senior research manager Randwil Dinbo Macaranas said in a briefing yesterday.

Colliers expects that overall demand, as measured by total transactions, will grow by over 8 percent in the next 12 months primarily due to the sustained demand from offshore gaming.

Richard Raymundo, deputy managing director at Colliers, added that the BPO office take-up in the second quarter was part of expansion programs already committed last year but only closed this year.

But while BPOs have been expanding less in Metro Manila, he noted that there had been an uptick in provincial areas, where the Philippine Economic Zone Authority (PEZA) accreditation of IT parks was not an issue compared to the delays happening in the processing of such approvals in the metropolis.

In Metro Manila, the majority of recorded office property transactions in the second quarter came from Fort Bonifacio and Manila Bay, the areas said to be preferred by BPOs and offshore gaming companies. The volume from these locations is understandable given that these tenants require bigger office cuts, Colliers reported.

Based on Colliers’ report, some of the notable BPO locators during the year are Results in L&Y Plaza and Google in Vista Hub. On the other hand, offshore gaming companies sealed property deals in BioPolis, Meridian Park Tower 2 and Aseana 3.

“Meanwhile, traditional companies have located all across Metro Manila sub-markets, reflecting the increased demand from this segment when compared with prior years. Companies which took up spaces belong to industries such as financial services, pharmaceutical, telecommunications, manufacturing and serviced offices,” the report said.

Breaking down office demand from BPOs in the first semester, 22 percent came from knowledge process outsourcing—or the higher value added processing—while 9 percent came from call centers.

Outside of the 30-percent share by offshore gaming companies, other non-BPO offices accounted for 35 percent of demand in the first semester while government agencies had 4 percent.

Colliers expects more than 470,000 sqms of office space being completed for the remainder of the year, boosting total stock by about 5 percent. But despite the projected new supply, overall vacancy rate is expected to be capped at 5-6 percent in the next three years.

Due to the sustained demand from offshore gaming firms, Colliers sees rents growing by 6 percent to 10 percent across Metro Manila in the next 12 months.