The likelihood is strong for the office rental segment to secure around a million square meters of space this year and match last year’s record, according to Leechiu Property Consultants Inc.
As things stand, around half of the available office rental have been sealed thus far this year and that in the past 12 years some 50 to 60 percent of office space transactions happen in the second half of the year.
“It gives us a lot of optimism that last year’s number, which was 1 million square meters, or almost that number, full-year demand is within reach,” Miko Barranda, director for commercial leasing at Leechiu Property Consultants, said.
He also highlighted the increasing demand from Philippine offshore gaming operations that in past years have driven the growth in the real estate sector before the pandemic struck.
“For the first time in a long time, POGOs have taken relevant space in the last quarter. There was a big lull in 2023 from 2019, where at the peak, they were taking 700,000 square meters in a single year but dropped to about 20,000 square meters. But in the last quarter alone, they have clocked in close to 77,000 square meters,” Barranda said.
According to him, the demand for office space has kept vacancy levels in Metro Manila at 17 percent but seen to further decline in the years ahead as demand outpace supply.
He noted the business process outsourcing sector continues to grow although many have adopted a hybrid work set-up.
“Traditional offices, there’s been a flight to quality, basically those that are in older buildings, moving to newer buildings, taking advantage of the market, seeing that potential to get good rates today and locking that up,” Barranda noted.
He said the typical term lease for an office at present averages three to five years although there are tenants who sign a 10-year lease to lock in the current lease rates.
Office space supply continue to be strong although developers cannot accommodate a contiguous 5,000-square meter space demanded by some locators.
“A lot of the space there are actually fragments, meaning in a building they may have 3,000 square meters but it’s not all in the same floor. If you look at how POGOs have affected the Bay Area from 30 percent, it’s now at 23 percent. So if this continues, which the Bay Area really needs because of the overwhelming supply it had the past quarter, then we will see whether this will continue,” he said
He said there’s still 600,000 square meters office space entering the market but if developers are able to plug in another 500,000 this year, “then we’re basically just equilibrium it.”
Beginning next year through 2027, supply drops down significantly as stop building because of the market at present is scary.
“No one wants to take a chance and risk,” he said.
