Metro Manila office vacancy remains double-digit in Q2 2021

Vacancy levels in the Metro Manila office market continued to rise in the second quarter of the year despite recording new transactions, latest data from Cushman & Wakefield Philippines showed.

In its latest report, Cushman & Wakefield said overall Prime and Grade ‘A’ office vacancy rates in Metro Manila rose by 157 basis points (bps) quarter-on-quarter to 12.2 percent, with most major markets demonstrating double-digit vacancy rates.

“Office space absorption levels remained in the negative territory, showing that the impact of office space leavers and increasing space rationalization initiatives still outweigh the level of new transactions in the market,”Cushman and & Wakefield said.

It added that there were also large office spaces made available by some companies moving into newer buildings, the relocation transactions for which were done pre-pandemic.

“While we saw some key transactions within Metro Manila in the first half of the year, there are still notable exits, downsizing, and even cancellation of reserved floors, which contributed to the continued increase in overall vacancy rate,”said Tetet Castro, Director and Head of Tenant Advisory Group at Cushman & Wakefield.

“With the vaccination program being expanded to cover more sectors of the workforce, it is hoped that the renewed confidence in going back to the office will translate to demand as early as the second half of 2021,”she added.

Cushman & Wakefield Director and Head of Research, Consulting & Advisory Services Claro Cordero said the pandemic continues to cause completion delays in new office projects, in a bid to help keep vacancy rates from ballooning further with the still tamed demand for office space.

He added that the office sector is also bolstered by the rapid expansion of crisis-proof industries such as logistics and e-commerce companies.

“These companies do not only require additional space for warehousing facilities outside Metro Manila but for presence in major CBDs, as well,”Cordero said.

Moreover,Cordeor stressed that the resilient global outsourcing demand is seen to spearhead the recovery of office space demand.

“To ensure its growth post-pandemic, the IT and business process management (IT-BPM) industry need a more consistent set of business incentives and prioritization in the ongoing inoculation program,”Cordero said.

Figures from Cushman & Wakefield show that average office rents in the Manila market continued to decline in the second quarter of the year by 1.5 percent to P1,066 per square meter per month.

The average rents in Mandaluyong City, despite showing a stable rental figure quarter-on-quarter, exhibited the highest year-on-year decline of 8.7 percent.