Property consultant Colliers said the office segment is poised for a gradual recovery after several quarters of decline.
Kevin Jara, Colliers associate director for tenant representation, said the segment is on its second quarter of net positive takeup, indicating transactions are holding firm despite the popularity of hybrid work arrangements.
Supply is reverting to pre-Philippine offshore gaming operation (POGO) levels last seen in 2016.
For the first half of the year, Colliers recorded a 325,100-square-meter (sq.m.) takeup, up 6 percent from 200,700 sq.m. last year.
Office space completion in the second quarter alone hit 146,700 sq.m.. While this remains lower than the 306,100 sq.m. reported in the first quarter, it is better than the 145,000 sq.m. recorded a year ago.
For the remainder of the year, Jara said the segment expects to see the delivery of 356,200 sq.m. more of office space.
“Makati Fringe and Ortigas CBD (central business district) are likely to cover 65 percent of the remaining supply. Among the buildings due to be completed are Makati Commerce Tower, PMI Tower, Studio 7, SM Fairview Towers, and Corporate Finance Plaza,” he said.
Between 2023 and 2026, Colliers expects the annual completion of about 543,300 sq.m., back to pre-POGO levels in which yearly completion was between 450,000 and 550,000 sq.m.
Jara said traditional and outsourcing firms will lead the take-up in space in the segment this year given the threat of a recession in the United States, leading US firms to outsource their services to countries like the Philippines.
“The depreciating peso should also make the country an attractive option for outsourcing firms,” Colliers said.
Office vacancy was recorded at 17.7 percent, up from 17.3 percent in the first quarter of 2022. Colliers however said the uptick is not substantial.
It projects vacancy to hit 18.2 percent by end-2022, up from 15.7 percent last year as the segment welcomes 808,900 sq.m. of new supply.
Rent is expected to improve by next year. Rents posted a 2.6 percent drop in the second quarter compared to the first quarter, slower than the 3.1 percent drop recorded for the first quarter in relation to the prior period.
“Overall, we forecast rents dropping in 2022 albeit at a much slower pace of 6 percent compared to the 12 percent correction in 2021,” Colliers said.
Colliers noted the segment’s net absorption in the second quarter to have hit 45,100 sq.m., the highest since the first quarter of 2020.
Colliers retains its projection of a 350,000-sq.m. net take-up this year, a reversal from the 273,100 sq.m. contraction recorded last year.
According to Joey Roi Bondoc, Colliers associate director for research, compressing yields are forcing developers to delay condominium launches, as they stay cautious in the current environment.
Preselling take-up in Metro Manila reached 8,600 units, still down from 10,600 units a year ago.
The secondary market, meanwhile, is likely to benefit from the return of foreign employees as well as local firms’ return-to-office mandates, Bondoc said.
“We see this positively influencing prices and rents in major business districts. To attract potential buyers, we recommend developers offer more attractive and innovative promos and payment schemes; highlight amenities that will differentiate their projects and to attract discerning clients; and explore securing green building certification especially with the growing demand for more sustainable residential projects beyond COVID-19 pandemic,” he said.
