The Metro Manila office market continued its path to recovery in 2022 as it ended the year with a positive net absorption, a reversal of the negative take-up in the year before, a property services firm said.
In its latest Metro Manila office briefing, KMC Savills, Inc. said net absorption of around 270,900 square meters (sqm) was registered in the Metro Manila office market in 2022.
“More than a third of net demand was recorded in the fourth quarter of 2022 as rents continued to decline,” KMC Savills said.
It pointed out, however, that Bonifacio Global City (BGC) accounted for more than half of annual demand, with a net absorption of around 141,100 sqm, higher than the 133,700 sqm in 2019.
“Most tenant inquiries have gravitated towards the leading submarket this year due to its superior-quality stock and location. The preference for BGC has aided most landlords to enjoy vacancy rates in the single digits,”the report said.
KMC Savills said BGC is expected to be the main driver of Metro Manila office market’s performance in 2023.
“We forecast net absorption to slightly increase in 2023 but may be isolated in the top submarkets,” it added.
Meanwhile, the property services firm reported that average rents declined by only 0.8 percent year-on-year by the end of 2022.
“Although BGC’s rents grew by 1.2 percent YoY, the current average rental rates cannot correct the office supply glut Metro Manila is facing,”KMC Savills said.
“With almost 1.7 million sq m of vacant Grade A office space, another 1.2 million sqm in the pipeline, changing occupier strategies, and rising interest rates, the office market is in an unsustainable condition at these rates,”it added.
Moreover, KMC Savills said that even with the commendable rebound in net absorption in 2022, it does not see total occupancy return above 85 percent of office stock within its forecast horizon until 2025.
“The top submarkets may possibly avert a prolonged office oversupply, but the Makati CBD and Ortigas Center are still at risk if office demand from the BPO sector loses steam in favor of provincial markets. Even with sustained outsourcing demand, greener and newer buildings will remain at the top of the pecking order,”it said.
“Again, we maintain our recommendation to landlords to prioritize occupancy over yields in 2023,”it added.
