Office space vacancy rate across Metro Manila has reached 17 percent or 2.33 million square meters in the third quarter this year, a property management consultancy study showed.
A study by Leechiu Property Consultants (LPC) showed that of total 2.33 million sqm vacant office spaces, 65 percent are located across 73 buildings and have meaningful vacancies of at least 10,000 sqm. The rest of 35 percent are fragmented spaces across 316 buildings.
Of the total vacant offices spaces, 1.27 million sqm are located in buildings that are not registered with the Philippine Economic Zone Authority (PEZA) while the PEZA-registered buildings have current vacant spaces of 1.06 million sqm.
In terms of specific business districts in the National Capital Region, the study showed that Bay Area, Alabang and Quezon City have the highest vacancy rates at 25 percent, 23 percent and 22 percent, respectively. Ortigas/Pasig/Mandaluyong with combined 2.69 million sqm office space supply has 18 percent idle office space rate.
Taguig City has the lowest vacancy rate at 8 percent although it has also smaller supply of 639,000 sqm. The Makati Business District, which has the highest office space supply of 3.74 million sqm, has 12 percent vacancy rate. More than half of the buildings with sizeable vacancies in Makati were previously tenanted by POGOs.
Meantime, Bonifacio Global City with office space supply of 2.1 million sqm has also lower vacancy rate of 13 percent.
LPC, however, said they do not expect the vacancy rate to have a meaningful impact on rental prices.
Despite a relatively elevated office space vacancy rate, LPC said that office space demand in the country is on the road to recovery with take-up in the first nine months of 2021 at 383,000 square meters led by the IT business process management (ITBPM) sector.
Based on the LPC study, office space demand in the January-September period was already 98 percent of 2020’s full-year demand.
Compared to previous 2021 quarters, the LPC report showed that third quarter demand slowed due to mobility issues brought about by the rising cases and strict lockdowns of previous months. But this has been offset by 228,000 sqm. of active office leasing requirements seeking to be completed within the next six months, the study explained.
The study also said that contractions have slowed in 3Q 2021 to 42k sqm., decreasing by 69 percent from second quarter 2021. All these led LPC to forecast full-year 2021 office demand to close at 450,000 sqm. – 500,000 sqm. with growth continuing to be led by the IT-BPM sector.
This segment firmly remains a catalyst of growth and accounts for 129,000 sqm. of the live requirements likely to be closed in six months.
To date, IT-BPM take-up represents 44 percent of the demand or 169,000 sqm. Notably, a high 25 percent or 94,000 sqm have been in provincial locations with IT-BPMs accounting for most of that number. Iloilo took up 37,000 sqm. of that number, outpacing the combined demand year-to-date of Clark, Laguna and Davao.
“While the recovery has not been as fast as earlier predicted, the worst appears to be behind us. We also note that government reforms have buoyed the industry,” observed LPC CEO David Leechiu in a recent media briefing.