PROPERTY consultancy firm Colliers International Philippines on Thursday, Oct. 29, 2020, said leasing activities continued to decline in the National Capital Region (NCR) with net take-up in negative territory for the second consecutive quarter.
A negative net take-up means that vacated office spaces outstripped absorbed or occupied offices during the period.
In a statement, Colliers said it recorded a net take-up of −113,000 square meters (sq.m.) in the first nine months of 2020 from 605,600 sq.m. absorbed in the same period in 2019.
This translates to an office vacancy of 7.1 percent in the NCR (Metro Manila) as of the third quarter, nearly double the 4.3 percent posted by the end of 2019.
Colliers projected that the 2020 vacancy will reach 8.3 percent, the highest since the 8.6 percent posted during the global financial crisis (GFC) in 2009.
It attributed the worsening office vacancy to Philippine offshore gaming operators (Pogo) and outsourcing companies shutting down or rationalizing their office footprint in line with the remote working arrangements being implemented to contain the coronavirus disease 2019 (Covid-19) pandemic.
Colliers said the Pogo sector vacated a total of 154,000 sq.m. as of the third quarter. Forty percent, or 61,000 sq.m., were in Quezon City while 27 percent were in the Bay Area, 13 percent in Alabang, 8.0 percent in Makati and 7.0 percent in Ortigas.
Colliers said the leasing market will continue to be anemic for the rest of the year.
“In our opinion, several tenants are waiting until the pandemic and lockdown issues are settled before they re-engage the market. Hence, Colliers sees a continued slowdown in demand for the remainder of 2020,” the company said.
“We now project a net take-up of about −121,900 sq.m. in 2020. This indicates that the size of office to be vacated this year will more than outstrip occupied space. This is a huge turnaround from 899,200 sq.m. of net take-up in 2019,” it added.
Colliers also retained its forecast of a 17 percent average drop in lease rates in 2020.
“This is the steepest decline since the 14 percent drop in 2009. In our view, this may even go higher as we may see a further correction in submarkets where there is significant space vacated by Pogo,” the company said.
Colliers said office leasing recovery will primarily hinge on recovery of general business sentiment, which should entice local businesses to reopen, and recovery of global economies that outsource services from the Philippines.
“In our opinion, key segments such as telecommunications, medical coding, health information management, and e-commerce should help lift leasing and hence, rental growth recovery in H2 (second half) 2021,” the company said.
Meanwhile, delays in construction have also resulted in a 65 percent drop in new office supply.
Colliers said new supply will reach only 385,000 sq.m. in 2020, 65 percent lower than its original forecast of 1.07 million sq.m. as construction is likely to be delayed by six months to one year or even longer. (MVI / SunStar Philippines)