Tilted to the upside: Renewed optimism on office recovery

Colliers Philippines believes that tenants should continue seizing opportunities in the market, including lower rates in new buildings in major hubs.—Hunter Reilly/Unsplash

More employees are starting to report on site. At Colliers Philippines, we believe this should help lift the office leasing market, whose recovery will also be supported by the delivery of new office towers over the next nine months.

Colliers Philippines saw an improvement in office transactions in Metro Manila last year, driven primarily by traditional and outsourcing firms. Our Office Services team, which assists some of the largest occupiers and landlords in the country, is expecting further improvement in deals in 2022. Supporting our projected recovery in office leasing is the completion of close to 900,000 sqm of new office supply.

Colliers Philippines believes that tenants should continue seizing opportunities in the market, including lower rates in new buildings in major hubs such as the Bay Area, Ortigas CBD, Quezon City and Alabang.

Landlords meanwhile should continue lining up new projects to capture demand as outsourcing and traditional occupants start reporting on site.

Support the lifting of AO18

Colliers encourages landlords and occupiers to push for the lifting of Administrative Order 18 (AO 18), which imposed a moratorium on the approval and processing of new ecozones in Metro Manila.

The Philippine Economic Zone Authority (Peza) also supports the lifting of the moratorium as it sees the continued expansion of Information Technology-Business Process Management (IT-BPM) firms in Metro Manila. Peza added that the pending IT-BPM investments in the capital region may still proceed despite the approval of the Corporate Recovery and Tax Incentives for Enterprises (Create) Act.

Lock in space in newer buildings in key CBDs

Colliers believes that the 633,900 sqm of new office space completed in 2021 will give expanding occupiers a broader selection of offices to move into. The 12.4 percent rental correction in 2021 also provides an opportunity for occupiers to lock in space in newer buildings in core locations in Metro Manila such as Fort Bonifacio and Ortigas CBD. Landlords should be more flexible with their terms to ensure a healthy level of occupancy in their buildings.

—Jason Dent/Unsplash

Among the new office towers due to be completed in 2022 include DoubleDragon Tower, iMet BPO 2 and 3, I-Land Bay Plaza Bay, Nex 54, Southkey HubTower 2, Makati Commerce Tower, and Cebu Exchange Tower.

We likewise see sustained office take up in Cebu in 2022.

Partner with flexible workspace operators

Colliers has observed that some firms taking a wait-and-see stance during the pandemic are occupying flexible workspaces which they are using as swing or temporary offices. Firms also occupy these spaces while their offices are being redesigned or fitted out. Competitive rates and the availability of short-term leases entice tenants to occupy flexible spaces. Among the locations that have significant amount of vacant flexible workspaces are Makati CBD, Fort Bonifacio and Ortigas CBD.

—Kate Sade/Unsplash

Transactions jumped 18%In 2021, Colliers recorded 422,400 sqm of office transactions, up 18 percent from the 357,400 sqm posted in 2020. Traditional occupiers engaged in e-commerce and financial services, as well as government agencies and transport and logistics firms led the take-up in 2021 followed by outsourcing companies.

Gradual recovery

The completion of new office space and the substantial decline in rents in Fort Bonifacio, Ortigas CBD and Bay Area should enable occupiers to consider these prime locations for their expansion and return to office plans in the next 12 months. The completion of new buildings as well as execution of back-to-office plans will help in the rebound of the office leasing market in Metro Manila.

In our view, office leasing recovery also plays a major role in stoking demand for condominium units over the next nine months.

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