Nowhere to go but up
—MARC ANTOINE ROY/UNSPLASH
The title aptly captured how I felt after seeing the UP Men’s Basketball team win the UAAP championship. I thought I’ll never see UP regain basketball glory in my lifetime.
But enough of basketball euphoria.
In my previous face-to-face presentations and webinars, participants always ask about the Philippine property market’s potential for recovery, especially now that we have a new president, democratically elected by more than 31 million Filipinos.
Previously, I emphasized how the office market showed resilience despite the pandemic. Office, in fact, has been one of the more stable property segments.
Colliers Philippines sees the office market finally turning a corner as it recorded a positive net take-up in the first quarter of 2022 after seven consecutive quarters of negative net absorption. This means that office space deals that materialized outpaced the amount of space vacated by tenants. Traditional and outsourcing companies continue to dominate demand as they take advantage of the rental correction and availability of new office buildings in major business districts. Companies’ return-to-office mandates should also support office absorption over the next 12 months.
Take advantage of rental corrections and prevailing market conditions
Office rents have dropped by about 30 percent compared to pre-COVID-19 levels. In our opinion, this should enable occupiers to implement flight-to-quality and flight-to-cost measures in established business districts such as Makati CBD and Fort Bonifacio. Meanwhile, landlords should continue offering flexible leasing schemes such as rent-free periods, delayed escalations, longer fit-out periods and tenant improvement allowance to attract and retain tenants.
Proactively seek new tenants from economic measures
In our view, the passage of economic reforms such as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, amendments to the Foreign Investments Act (FIA), Retail Trade Liberalization (RTL) and the Public Services Act (PSA) should have a positive impact on the country’s investment climate. The relaxed investment requirements, reduced corporate income tax and increased foreign ownership will likely lead to greater demand for office space in the country.Colliers recommends that landlords seize opportunities from these legislative measures and secure leases especially from expanding multinational and outsourcing firms. Meanwhile, foreign entrants should explore office options in established business districts such as Makati CBD and Fort Bonifacio (Prime and Grade A buildings) for their local headquarters operations. Colliers Philippines’ tenant representation team led by Dom Andaya, can provide more insights.
Lock in spaces in new and green certified buildings in key CBDs
As employers start to welcome workers back to the office, we recommend that landlords offer spaces that protect their employees’ health and well-being. This may be in the form of occupying spaces in buildings which have Leadership in Energy and Environmental in Design (LEED), Building for Ecologically Responsive Design Excellence (BERDE), or WELL certifications.
From 2022 to 2025, Colliers projects that about 35 percent of the new supply in Metro Manila will have green building certifications. Most of the green and sustainable buildings likely to be completed during the period will come from Makati fringe, Fort Bonifacio, Ortigas CBD and Quezon City. These include One Filinvest, Makati Commerce Tower, Studio 7, DoubleDragon Tower and SM Mega Tower. My colleague Maricris Sarino-Joson can provide more assistance.
Partner with flexible workspace providers
Colliers has noted the increasing inquiries for flexible workspaces as occupiers implement their business continuity plans (BCP) and explore the viability of plug-and-play offices, and swing (temporary offices) spaces for their employees.
Colliers encourages landlords to provide additional fitted spaces by partnering with serviced office providers or leasing out vacated spaces for short-term contracts. Meanwhile, we recommend that occupiers look for new and high quality workspaces in locations with substantial flexible workspace vacancies such as Makati CBD, Ortigas CBD and Fort Bonifacio.
Recovery on the horizon
The Metro Manila office market is starting to recover after two years of slump. Our team has been to Cebu, Bacolod and Iloilo the past few months and we are seeing enthusiasm from tenants, landlords and ICT councils.
As we always stress at Colliers Philippines, collaboration is key. We hope that we will be able to sustain this optimism and upward trajectory for the remainder of the year.
With a new set of economic managers and hopefully, the continued implementation of pro-business and pro-property reforms, the Philippine property market definitely has nowhere to go but up.
