Office Space Vacancy in Metro Manila Highest This Year Since Global Financial Crisis-Colliers Report
Office vacancy in the country’s capital region is the highest it’s been since the global financial crisis in 2008, commercial real estate services firm Colliers International said Thursday.
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During the first nine months of 2020, office take-up was at negative 113,000 square meters from 606,000 posted during the same period one year ago. Negative take-up means vacated office space outstripped occupied space, according to Colliers.
The firm added that Philippine Offshore Gaming Operators (POGOs) have so far vacated 154,000 square meters of office space in Metro Manila this year, most notably in Quezon City, Bay Area, Alabang, Makati, and Ortigas. This has contributed significantly to office rents dropping up to 17 percent this year so far, the second-highest decline in the region next only to Hong Kong.
"We continue to see a challenging leasing market in Metro Manila,” Colliers said. “POGOs have been vacating space while some traditional and outsourcing firms have either closed shop or are rationalizing their office footprint with remote working arrangements."
On Wednesday, property broker KMC Savills also reported a bleak outlook for office and residential real estate in Metro driven by the exodus of online casinos.
“We’ve seen entire residential towers emptied out,” Michael McCullough, managing director at KMC in Manila told Bloomberg. He further explained that, while vacancies from online casinos are so far just a “rounding error” in the multi-million square meter home market, he said “we’ll continue to see a lot more of that continuing to compound in the next six months.”
After years of steady growth, demand for POGOs in the country has weakened this year mostly due to the coronavirus pandemic and higher taxes imposed by the government. The influx of Chinese mainlanders, which comprise a bulk of workers in the sector, drove up property prices before the onset of the pandemic.
“With business activity experiencing a downturn throughout the quarter, 3Q/2020 saw massive losses throughout the office market,” KMC Savills said in its third quarter Metro Manila Ofice Briefing. “Metro Manila’s occupancy continued to deteriorate for the second consecutive quarter with nearly 47,800 sq m of vacated office space. Vacancy rates climbed to 7.3 percent, nearly a two percent increase from 4Q/2019 (5.4 percent). As building completions continue to be pushed back, the incoming pipeline is still expected to add more pressure to the office market.”
KMC Savills’ data varies slightly from Colliers, which reported office vacancy for the third quarter of 2020 at 7.1 percent, up from 4.3 percent in 2019.
Colliers’ projected office vacancy for 2020 now stands at 8.3 percent, which is near the 8.6 percent recorded in 2009 during the height of the global financial crisis.
Colliers forecasts that office leasing will recover in the second half of 2021 buoyed by industries such as telecommunications, medical coding, health information management and e-commerce.
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"Colliers believes that office leasing recovery will primarily hinge on recovery of general business sentiment which should entice local businesses to re-open; and recovery of global economies that outsource services from the Philippines," it told ABS-CBN News.