Metro Manila faces highest office space vacancy since global financial crisis: Colliers

MANILA - Colliers International said Thursday Metro Manila could post the highest office vacancy since the global financial crisis as offshore gaming operators vacate spaces and BPOs rationalize requirements due to COVID-19.

"We continue to see a challenging leasing market in Metro Manila. POGOs have been vacating space while some traditional and outsourcing firms have either closed shop or are rationalizing their office footprint with remote working arrangements," Colliers said in a statement.

The downward trend in leasing continued with a negative net take-up in the third quarter of 2020 or 191,300 square meters (-2.1 million sq feet), it said.

Negative take-up means vacated office spaces "outstripped" or overtakes occupied offices during the period, it said.

Negative take up for the first 9 months reached -113,000 sq meters (1.2 million feet) from 605,600 sq meters (6.5 million sq feet) in the same period last year, Colliers said. 

This is equivalent to a Metro Manila office space vacancy of 7.1 percent as of the third quarter from 4.3 percent by the end of 2019, it said.

Colliers said vacancy could reach 8.3 percent, the highest since the 8.6 posted in 2009 during the global financial crisis.

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Operations from Philippine Offshore Gaming Operators (POGO), Colliers said, vacated 154,000 sq meters (1.7 million sq feet) as of third quarter including areas in Quezon City, Bay Area, Alabang, Makati and Ortigas. 

Traditional firms closing or shifting to work-from-home set up due to the pandemic also contributed to the vacancy increase, it said. 
 
Landlords have also become more "flexible" in requests for lower lease rates. It expected a 17 percent average drop in lease rates this year. 

Colliers, however says that office leasing will recover in the second half of 2021 buoyed by telecommunications, medical coding, health information management and e-commerce.

"Colliers believes that office leasing recovery will primarily hinge on recovery of general business sentiment which should entice local businesses to re-open; and recovery of global economies that outsource services from the Philippines," it said.