Colliers International remains optimistic about the rebound of the property sector despite the reimposition of the strict enhanced community quarantine (ECQ) in the National Capital Region this month.
Richard Raymundo, Colliers managing director, said so long as the rate of vaccination is maintained, public confidence will be regained and consumer spending will improve which will in turn be beneficial to the property sector.
Raymundo said retailers had been recovering 50 to 60 percent of their pre-pandemic sales while the office segment has turned a corner.
Transactions in the second quarter hit 84,700 square meters (sq.m.), 154 percent higher than the 33,400 sq.m recorded last year as tenants implemented “flight-to-cost and flight-to-quality measures.”
Traditional firms accounted for 56,900 sq.m. of space, 67 percent of total.
The outsourcing industry secured an additional 26,500 sq.m. of space with BPO companies such as Alorica and TaskUs expanding their office footprint in Quezon City.
“We believe lower base rents (and) good quality buildings contributed to the higher office space absorption.
Colliers has observed outsourcing and traditional firms led office space takeup in the second quarter and are likely to lead absorption in the next six to 12 months.
Colliers said occupiers with upcoming lease expirations are taking a more cautious approach by signing short or flexible leases to tide them over the next one to two years of uncertainty. Outsourcing firmshave also been taking up spaces in multiple sites near the residential communities of their employees.
A total of 142,400 sq.m. of space were completed for the period, up 148 percent from 57,400 sq.m. last year. Colliers said it expects new supply to reach 847,600 sq.m. this year, down from its previous forecast of 878,200 sq.m. as developers avoid overbuilding to prevent further increases in vacancies and correction of rents.
“Developers have become more prudent in their supply strategy to ensure that new supply matches actual demand as they await recovery,” it said.
“From 2021 to 2025, we project the annual completion of 621,300 sq.m. of new office space, down 3 percent from our first quarter projection of 642,700 sq.m. We expect Quezon City, Bay Area and Ortigas CBD to account for 47 percent of the new supply during the period,” it added.
Colliers said average rent fell 3.9 percent in the second quarter with a possible continued correction in lease rates in other submarkets such as Makati Fringe, Quezon City and the Bay Area due to increasing vacancy.
“Colliers believes Ortigas CBD will likely continue to attract traditional occupiers and some outsourcing occupiers due to submarket’s discounted rents. The availability of new office space should also allow occupiers to consider Ortigas CBD for their expansion and consolidation plans,” it said.
With the average rent down 17 percent last year, Colliers said tenants “should keep an eye on new buildings completed in selected CBDs offering discounts ranging from 6 percent to 20 percent.”
“As office leasing demand remains subdued due to COVID, we recommend that occupiers be on the lookout for Prime and Grade A buildings especially for long-term leases which are likely to be a bargain in 2021,” it said.
Llandlords should be quick in securing occupancy by offering concessions such as flexible lease terms, rent-free periods, partial termination options, delayed escalation and fit-out financing,” it added. – Ruelle Castro
