Property consultant Colliers International said it expects tax reform uncertainty to affect the expansion plans of outsourcing firms, compounding the regulatory issues that cast doubt on the sustainability of Philippine offshore gaming operations.
Colliers said landlords with sufficient space — Philippine Economic Zone Authority- proclaimed or otherwise — should engage tenants proactively and offer flexible lease rates.
“Developers planning to raise funds to develop or refurbish office towers should consider Real Estate Investment Trust (REIT) opportunities” it added.
“Cost-sensitive, outsourcing and traditional firms should spread their costs by relocating some of their operations to buildings outside of major business hubs,” it said.
According to Colliers, traditional and offshore gaming firms are likely to drive office space absorption in the next 12 months, with supply seen to add 1.07 million square meters (sq.m.) for the year.
Last year, traditional occupants
covered 34 percent of all transactions in Metro Manila and will see a sustained pace of absorption from the sector in the next 12 months, “especially with low interest rates boosting their appetite for expansion and the timely implementation of the 2020 national budget likely to pump-prime the country’s economy,” it said.
“The committed public infrastructure spending should also chip in to higher take-up from construction and engineering firms. We encourage landlords to continue to be mindful of these firms’ office space requirements,” it added.
Up until 2022, Colliers pegged office supply to average 1.02 million sq.m. per year, 56 percent of which will come from scheduled completions in the Bay Area, Fort Bonifacio and Ortigas.
Metro Manila’s office supply increased by 227,000 sq.m. in the fourth quarter alone, raising its completed office supply to 11.9 million sq.m. as of end-2019, Colliers said.
Colliers expects Metro Manila’s leasable office space to reach 14.9 million sq.m. by the end of 2022, up 25 percent from 11.9 million sq.m. in end-2019, which translates to about 1.02 million sq.m. of new supply each year from 2020 to 2022.
Colliers sees rental growth slowing down to 5.6 percent per year between 2020 and 2022.
“While this is slower than our previous forecast of 6 percent, this is still one of the highest rental growth rates in Asia during the period,” it said.
Colliers noted that office towers due to be completed in 2020 are about 59 percent pre-leased as of end-2019. It also expects faster rental growth in the Bay Area as well as the Makati central business district due to sustained demand amid limited supply.
Colliers expects Alabang, Quezon City and Ortigas Center and fringe rent growth picking up further in the next 12 months as leasing queries in 2019 materialize. The pace of increase in Ortigas Center and Makati fringe is likely to slow down.
