Metro Manila’s property sector turned out to be more resilient than expected in 2017 as the offshore gaming industry, out of nowhere, made up for the slack in demand from business process outsourcing (BPO) firms, property consulting firm Colliers Philippines said.
Net office take-up in Metro Manila reached a record-high 639,500 square meters (sqms), rising by 6 percent and outperforming earlier forecasts, Colliers senior research manager Dinbo Macaranas said in a recent briefing.
The growth in net take-up was attributed to the strong domestic economy alongside new jobs created in the finance, insurance, real estate, banking and other related sectors.
“The story in the office sector has been the decline of BPOs in 2017 … We were even cautioning about the possibility of one-off demand from POGOs (Philippine offshore gaming operators), but if you look at the fourth quarter numbers, it outperformed all our forecasts,” Macaranas said.
Aside from the entry of POGOs—online gaming operators serving overseas markets, especially mainland China—Macaranas also cited an improvement in the pace of proclamations by the Philippine Economic Zone Authority in Metro Manila for new hubs.
But office supply in Metro Manila likewise saw a record increase in inventory, with about 850,000 sqms completed in 2017. Macaranas said vacancy rates would thus likewise move up.
From 5.3 percent at present, Colliers expects vacancy rates to rise to the 7-10 percent range in the next few years, assuming there is a consistent 6-percent annual increase in net take-up.
Total completions during the last quarter of 2017 reached 269,000 sqms of office gross leasable area, pushing full year completions to 852,000 sqms. The average in the last three years was at a mere 540,000 sqms.
Current stock in Metro Manila is now at 9.7 million sqms. Planned projects of developers were still over 900,000 sqms annually until 2020.
Among the submarkets, Manila Bay Area and Fort Bonifacio are seen to have the advantage in the short- to medium-term given the respectable size of new projects and the largely concentrated nature of developments in these locations. Notable structures soon to open in Fort Bonifacio include Daiichi’s The Finance Center, Alveo’s High Street South Corporate Plaza 2 and Megaworld’s World Commerce Plaza.
Colliers said a vacancy between 5-9 percent was “respectable.” This level was seen to provide tenants with enough office space options to choose from. This would also allow landlords to have the opportunity to compete with counterparts based on cost, location and building quality.
Notably, this is the first time in the last seven years that the market has had an office vacancy rate of above 5 percent, signaling a shift from a landlord-driven market.
In the long run, Colliers sees a potential for Ortigas to reemerge as a key business district given the planned buildings due for completion in 2020.