Demand for office space revving up, says Leechiu

Demand for office space accelerated in the first quarter of the year and is on track to match or exceed the takeup in 2022 despite an expected slowdown in the economy, according to Leechiu Property Consultants.

“We seem to have reached new highs for the first quarter, which historically has been the slowest quarter of the year,” Leechiu Property Consultants CEO David Leechiu said in a recent briefing.

Office demand transactions from January to March this year more than doubled to 264,000 square meters (sq m) from the same period in 2022.

“[Demand] could be on par with 2022 numbers, if not better, and that’s despite all the things that are going on in the world,” Leechiu said.

Office leasing demand hit nearly 1 million sq m in 2022—the third-best performing year to date, according to the company.

This was driven by the IT and business processing outscoring sector, which grew 67 percent despite the hybrid setup that allowed some employees to work from home.

Traditional occupiers also accounted for 144,000 sq m of the first quarter demand figure.

Vacancy rates

Data from Leechiu Property, however, that office vacancy rates remain elevated at 18.2 percent in Metro Manila after recently completed projects boosted available supply.

There was another 1.3 million sq m in the pipeline for the year “but supply is expected to significantly fall starting 2024.”

Among all the Metro Manila districts, Bonifacio Global City is expected to lead the market recovery.

Meanwhile, Leechiu Property said the residential condominium market grew 8 percent from the previous quarter, with over 12,000 units sold. Sales in the luxury segment remain healthy, registering over 400 percent growth.

Eleven new residential towers with 4,900 units were launched during the quarter.

Even then, the number of new vertical residential projects were down over the last three years.

“Development prospects could be constrained by looming concerns from sales cancellations that seem to trend higher than pre-COVID levels, as observed by real estate sales agents on the ground,” Leechiu Property said.

“While we believe this is a carryover of the effects from the previous three years, we think this will taper down in the coming periods as developers become less lenient in the prequalification of their buyers,” it added.