Headwinds to stifle office space demand

CEBU, Philippines — While the general outlook for office space occupancy is generally upbeat, several headwinds are noted that may curtail demand.

In its latest market assessment report, Colliers International Philippines revealed that for one, tax reform uncertainty is affecting the expansion plans of outsourcing firms while regulatory issues continue to cast a doubt on the sustainability of online gaming sector.

Significantly, Colliers encourages landlords with sufficient space (PEZA- proclaimed or otherwise) to 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.

Meanwhile, cost-sensitive, outsourcing and traditional firms should spread their costs by relocating some of their operations to buildings outside of major business hubs.

Early this year, Colliers projected that Mandaue City’s office occupancy is expected to rise starting 2020, as it gains attention from the outsourcing firms, particularly from the online gaming operations.

“Colliers projects greater absorption of Mandaue space as we see the business district capturing a fraction of offshore gaming operations from Mactan,” said Joey Roi Bondoc, senior research manager at Colliers International Philippines.

But with the emerging headwinds noted, rosy outlook may be affected if the government will not respond accordingly.

Colliers expects the delivery of about 279,000 sq m of new supply from 2020 to 2021, more than half is likely to be in the city’s main business districts.