Q1 office transactions highest since start of pandemic but actual take-up still down

Office space transactions in Metro Manila in the first quarter of the year registered its highest since the pandemic started.

However, net-take up remained in the negative due to lease cancellations and non-renewals.

“The first quarter transaction level in Metro manila was the highest that we recorded during this pandemic at 157,000 square meters (sqm),” Colliers Philippines Office Services director Dom Frederick Andaya said during the firm’s quarterly property briefing today, April 30.

This is more than double the 62,000 sqm transactions in the fourth quarter of 2020.

E-commerce, outsourcing and data centres were the main drivers of office space absorption in the quarter, with e-commerce firms such as Shopee and Amazon leading office space take-up.

“In our view, firms from essential segments are likely to lead office take up in the next 12 months,” Colliers said.

It added that traditional firms also had a substantial share of office space take up, covering about 68,40 sqm of office deals or 44 percent of total transactions in the first quarter of 2021.

The property services firm said that while some outsourcing firms continued expanding, some of them continue rationalizing office spaces as they carry out work-from-home (WFH) strategies and comply with government-mandated health protocols.

“Colliers believes that outsourcing firms are likely to continue these measures until all employees have been vaccinated against COVID-19,” Colliers said.

Despite the high level of office transactions, net takeup of office spaces remained in the negative in the first quarter at 52,800 sqm due to lease cancellations  and/or non-renewals.

Colliers said the increasing number of pre-terminations and the substantial new office supply that came online across Metro Manila totaled to 199,900 sqm, resulting in a vacancy of 11 percent in the first quarter, higher than the 9.1 percent vacancy in the fourth quarter of 2020.

“Colliers sees net take-up recovering by the end of 2021, especially with the successful roll out of the Covid vaccine,” the property services firm said.

It is projecting a full year 2021 net takeup of 351,300 sqm.

Moreover, office vacancy is forecast to increase to 12.5 percent at the end of 2021 due to the projected new supply of 878,200 sqm.