Office lease deals highest in a year

MANILA, Philippines — Office lease transactions reached their highest level in Metro Manila in the first quarter since the start of the lockdown last year, real estate services firm Colliers Philippines said.

Dom Frederick Andaya, director for office services tenant representation at Colliers Philippines, said the first quarter office lease transaction level in Metro Manila was the highest recorded during the pandemic at 157,000 square meters (sqm).

He said two-thirds of the Metro Manila transactions were expansions mainly by e-commerce companies like Shopee and Amazon, business process outsourcing firms and traditional occupiers.

Andaya said there were still some transactions from Philippine offshore gaming operators (POGOs) in the first quarter, a positive sign they are here to stay.

“As of the first quarter, POGOs still occupy more than 800,000 sqm of space and we hope that the exodus will eventually stop with the expected settlement of the taxation issue and eventual lifting of the travel ban,” he said.

Despite posting the highest level of transactions in Metro Manila in the first quarter, office vacancies still went up to 11 percent during the period from 9.1 percent.

Around 200,000 sqm were added to the stock from newly completed buildings, and some companies had lease cancellations, non-renewals and pre-terminations.

Colliers Philippines expects office vacancy to rise to 12.5 percent by the end of the year as it projects new supply of 878,000 sqm and net take-up of about 351,300 sqm.

It expects demand from e-commerce, outsourcing, data centers and even POGOs moving forward, to temper the vacancy increases.

On the residential and retail sector, Colliers Philippines expects vacancy rates to rise this year due to the impact of the pandemic.

For the residential sector, Joey Bondoc, associate director for research at Colliers Philippines, said the vacancy rate is expected to rise to 17.2 percent this year after reaching 15.6 percent last year.

Overall vacancy in the Metro Manila residential sector reached 16.3 percent in the first quarter.

“We are seeing a rise in vacancy in the office market. It’s the same trend basically for the residential market,” Bondoc said with weak office leasing demand contributing to subdued residential demand.

Colliers Philippines has observed that tenants are putting on hold housing requirements given the rising number of COVID-19 cases and concerns on additional move-in expenses including COVID-19 testing.

The mid-income or luxury segment is seen as a bright spot for the residential sector.

“We are not seeing a recovery in terms of vacancy in 2021. Perhaps that will likely happen in 2022 especially with the lower number of completions,” Bondoc said.

As for the retail sector, Colliers Philippines projects vacancy will rise to about 16 percent this year, which will be the highest since 2002, due to the substantial new retail space to be completed, as well as closure of brick-and-mortar shops.

Metro Manila’s retail vacancy rose to 14 percent in the first quarter from 12.5 percent in the fourth quarter last year with a number of brick-and-mortar stores shutting operations as retailers shifted online given low mall foot traffic.