Office take up to hit record high

The office property market in Metro Manila may see take up hitting a record high of over 1 million sqm this year, as business process outsourcing (BPO) companies resume their expansion plans.

This was according to Colliers International Philippines, which reported on Wednesday that the Metro Manila office sector recorded a net take up of 641,000 sqm in the first half of 2018, higher than the 638,000 sqm posted for the entire 2017.

“We have observed that transactions in the first six months of the year remain diversified and Colliers believes that this bodes well for the Manila office sector in general,” said Dom Fredrick Andaya, Colliers International Philippines director for office services.

Based on its latest report, Colliers attributed the higher-than-expected take up to a number of factors. Among the key contributors was the expansion of BPO companies that held off plans in 2017.

It explained that the initial uncertainty in the Manila office market was brought about by the lurch to economic nationalism in the United States, led by President Trump’s anti-outsourcing stance; perceived decline in the peace and order situation in the Philippines associated with extrajudicial killings; and delay in the proclamation of Philippine Economic Zone Authority (Peza) buildings.

The strong take up in the first half of 2018 indicates that firms’ initial concerns have already been addressed.

On top of these developments, Colliers further noted that the strong demand is being complemented by record-high completion of new office buildings across the country’s capital.

As of end June this year, offshore gaming firms continue to be a major contributor to office demand in Manila. For the first half of 2018, these companies accounted for 24 percent of total deals, taking up about 180,000 sqm of space.

Initially operating within the Bay Area, offshore gaming companies have started to occupy space in other sub-locations within the country’s capital, with deals closed in Quezon City and fringe areas in Makati in the second quarter of 2018.

Colliers further reported that the demand from non-BPO and traditional occupants similarly remained robust.

This sector, which included government agencies, covered 34 percent of all transactions in the first half of 2018 or more than 250,000 sqm.

According to Colliers, the Philippine economy has been expanding by an average of 6.3 percent a year since 2010.

“The Philippine economy is projected to grow between 6.5 percent and 7 percent a year over the next three to six years and this should help sustain the traditional firms’ demand for office space,” Andaya said.

“This robust growth reflected not just the sustained dynamism of the BPO-led services sector but also the expansion of other key economic sub-sectors such as construction, telecommunications, banking and finance warehousing and logistics, and manufacturing. Companies engaged in these businesses were compelled to expand and thus occupy larger and high-quality office space,” the report further stated.

Major non-BPO deals for the first six months of the year include state-led firms and fast-moving consumer goods (FMCG), engineering, insurance, online shopping and logistics companies. Significant space was also occupied by flexible space operators such as Figari, Clock In, and Common Ground.

This, Colliers said, indicated that the flexible space market in Metro Manila continues to thrive.

Colliers meanwhile expects record-high supply for 2018.

It reported that about 630,000 sqm of leasable space were completed in the first six months of 2018, while another 440,000 sqm (4.7 million sq ft) of additional office space are expected to be completed in the remaining months, pushing 2018 completion to a little over 1 million sqm, another historical high.

“From 2019 to 2021, we project the completion of about 820,000 sqm of new office space per year. The Bay Area, Fort Bonifacio and Ortigas Center will corner bulk of the new supply,” Colliers further disclosed.

Vacancy in Metro Manila meanwhile is seen to hit 5 percent by end 2018, and will hover between 5.3 percent and 6 percent a year from 2019 to 2021.

“Colliers believes that a projected vacancy of between 5 percent and 6 percent per year from 2019 to 2021 should provide occupants with wider office space options to choose from. A 4.1 percent vacancy, which the Metro Manila office sector recorded after the 2009 global financial crisis up to 2016, hinders companies’ capacity to expand as they do not have an adequate choice of immediately available space,” Colliers said.

“Offshore gaming firms are continuously expanding, looking for office buildings with large floor plates. But vacancy in the country’s capital remains tight, pushing these companies to look for space outside Manila. Colliers encourages new and expanding offshore gaming companies to look for space in viable sites outside of Manila such as Cebu, Pampanga, and Laguna,” it concluded.—AMY R. REMO