Catch on the office rebound

The availability of options in prime locations and attractive rents should enable tenants to move from non-core to core locations including major business districts.

Outsourcing and traditional occupiers continue to drive office demand in Metro Manila. Improvement in vaccination rates, relaxation of mobility restrictions and rise in business confidence should buoy office space absorption in the next 12 months.

Colliers Philippines believes that the availability of options in prime locations and attractive rents should enable tenants to move from non-core to core locations including major business districts. We recommend that tenants take this opportunity to prepare for a return to the office, while renovating and assessing the optimal level of split operations.

We also encourage landlords to highlight value-added features and emphasize wellness and green building certifications.

Flexible spaces for tenants that wait-and-see

Colliers believes that occupiers should explore the viability of short-term leases. We have observed some multinational companies (MNCs) opting for short-term renewals and considering flexible workspaces. Flexibility may play a crucial role in a firm’s business continuity plan. Among the locations with significant amount of vacant flexible workspaces are Makati CBD and Fort Bonifacio.

Actively build relationship with existing, potential tenants

Colliers recommends that landlords be more proactive in accommodating tenants’ requirements to achieve optimal levels of occupancy. We encourage landlords to offer flexible leasing schemes through lower base rents, delayed escalation, longer fit-out and rent-free periods, and fit-out financing, among others, to attract tenants.

Opportunity to locate in prime locations

Colliers believes that now is an opportune time for occupiers to lock in leases in CBDs such as Makati and Fort Bonifacio. The narrowing rental gap between CBD and non-CBD locations allows occupiers to implement flight-to-quality measures.

This provides an opportunity for top-tier tenants to establish presence in prime locations and initiate their move away from non-core areas. Colliers encourages occupiers to take advantage of the attractive rents before we see a gradual recovery starting H2 2022.

Value-added features as differentiators

Aside from providing safe and healthy office spaces, landlords should also help tenants entice more employees to report on-site by highlighting their buildings’ amenities and other value-added features. Developers should also explore ways to differentiate themselves in the market amid growing preference for green and sustainable offices.

In our opinion, the incorporation of green and sustainable features will play an important role in occupier retention and attraction strategies post-COVID. From 2021 to 2023, about 40 percent of the new supply will be Leadership in Energy and Environmental Design (LEED) or WELL-certified buildings. Most of the buildings due to be completed will offer lower density ratios, curtain wall systems with thermal insulations, touchless access in elevators, vertical gardens, UV disinfection lifts and filtered air circulation systems to ensure a healthy and efficient workplace for traditional and outsourcing occupiers.

Similar to other office markets in the Asia Pacific Region, demand profiles are changing among tenants in the Philippines. Companies are looking for sustainable and healthy work environments that will provide confidence for their employees to return to workplaces.

They are looking for buildings which have embedded enhanced indoor air quality systems, contactless access as well as sustainable features like electric vehicle parking (with chargers), bicycle parking, façade glass with thermal insulations and green open spaces. Convenient amenities like access to food and shops and ease of accessibility are top of mind. Also, with social distancing and changes to workplace layouts, a flexible floorspace is a must.

Among the buildings likely to be completed in the next 12 months is the Makati Commerce Tower (MCT). The building is slated to achieve the latest version (4.0) of LEED Platinum following its expected completion in the third quarter of 2022. Designed to meet BPO requirements, MCT will provide square, column-free floor plates for flexible layouts as well as availabilities for five telecommunication providers and 24/7 backup power with N+1 configuration. To promote better energy efficiency, the building will be cooled via a centralized airconditioning system with dedicated fan coil units that ensure optimal air quality will not mix between tenants.

Colliers Philippines sees improvement in office supply and demand in Metro Manila over the next 12 months. We see optimism in the market with both landlords and tenants gearing up for recovery.