Office space tenants and landlords are encouraged to take this opportunity to lock in for better rates and prepare their buildings for a return to the office work, a property management and consultancy services advised.
This was emphasized by leading diversified professional services and investment management firm Colliers in its Q3 2021 Philippine property market reports.
“Tenants are urged to take this opportunity to prepare for a return to the office, while renovating and assessing the optimal level of split operations,” according to Colliers.
Landlords and tenants see opportunities in flight for quality outsourcing and traditional corporate occupiers continue to drive office demand in Metro Manila, according to Colliers’ latest report on office.
Colliers said this as net absorption of office space is projected to remain negative in 2021 but said that deals are expected to pick up in 2022. New supply in Q3 2021 reached 156,600 square meters (1.7 million square feet), up 102 percent year on year. Q4 2021 new supply will be in the Bay Area, Alabang, Makati CBD, and its fringes.
Average lease rates are projected to continue to decline due to subdued leasing and rising office vacancy, but a slow recovery starting 2022 is seen as office space absorption picks up. Vacancy rates continue to rise albeit at a slower pace. Colliers retains its forecast of a 15.6 percent vacancy in 2021 as pre-commitment among upcoming buildings remains muted.
It said that over the next 12 months, the improvement in vaccination rates, relaxation of mobility restrictions, and rise in business confidence should buoy office space absorption.
“The availability of options in prime locations and attractive rents should enable tenants to move from non-core to core locations including major business districts. Tenants are urged to take this opportunity to prepare for a return to the office, while renovating and assessing the optimal level of split operations,” the property consultancy said.
Colliers believes that now is an opportune time for occupiers to lock in leases in central business districts (CBDs) such as Makati CBD and Fort Bonifacio. The narrowing rental gap between CBD and non-CBD locations due to rental correction allows occupiers to implement flight-to-quality measures.
On the other hand, landlords should highlight value-added features and emphasize wellness and green building certifications.
For the residential market, Colliers aid that supply is expected to recover as developers maximize market recovery Residential demand across Metro Manila remains tepid. In the secondary market, leasing continues to be lukewarm due to the absence of demand from Philippine Offshore Gaming Operators (POGOs) and other expatriates, while some local professionals went back to their home provinces.
For this market, Colliers aid that rents are projected to rise gradually in 2022, partly facilitated by the easing of lockdowns, improved inoculation program, and the government-projected economic recovery.
Colliers expects vacancy to increase by the end of 2021 due to the delivery of new condominium units. Vacancy should recede in 2022 backed by office leasing recovery. In Q3 2021, prices dropped by 1 percent as demand for units in the secondary market remains subdued. Colliers retains its forecast of a slow recovery starting 2022. No new units were completed in the third quarter.
Colliers also lowered its estimate of new units to be completed for 2021 from 10,060 to 8,197 due to construction delays. In the pre-selling market, take-up in 2021 is unlikely to outpace sales recorded in 2020, but Colliers noted opportunities in fringe areas.