Metro Manila office space demand may grow by 50% this year

MANILA, Philippines — Demand for spaces in the Metro Manila office market may expand by 50 percent this year, mainly driven by the information technology- business process management (IT-BPM) sector, according to a report by Cushman & Wakefield.

In its Asia Pacific 2023 Office Outlook report, Cushman & Wakefield said it sees office space demand in Manila reaching 3.5 million square feet.

“New entrants from the IT-BPM sector are expected to flock into the country in 2023. This includes prospects that Cushman & Wakefield is already talking to at the moment, with take-up expected mid-2023,” the property consultancy said.

“After registering negative net absorption of 69,000 square meters (sqm) in 2020, demand is expected to return to positive territory,” it added.

Cushman & Wakefield said average net absorption from 2023 to 2026 is seen at 470,000 sqm, 30 percent lower than the average net absorption of 676,000 sqm from 2015 to 2019.

Meanwhile, the property said a total of 337,000-sqm of new office supply was expected in the fourth quarter of 2022, though some of this may not reach completion until 2023.

“Some developers have updated the expected completion dates for office projects launched prior to the pandemic, while some others have postponed projects indefinitely,” Cushman and Wakefield said.

It added that an average of 191,000-sqm of new supply is expected in the next five years, significantly lower than the 709,000-sqm average in the last five years prior to the pandemic.

“There is, however, no known projects scheduled for completion for 2027,”it said.

Moreover, the property consultancy said office rents are expected to have grown 0.4 percent year-on-year by the end of 2022, the first positive year-on-year growth since the first quarter of 2021.

“From there, rents are expected to grow on average by 2.3 percent per year up to 2027,”it added.

The report said that rental growth across much of   Asia-Pacific   appears comparatively benign and unlikely to match the high levels of inflation over the near term.

“Stronger rent growth is expected across many markets towards the end of the forecast horizon as new supply slows and demand improves as economic growth gains momentum,” it added.