THE METRO MANILA office sector’s capacity is expected to grow by 1 million square meters a year between 2019 and 2021, with demand for such space driven by the speed of the Philippine Economic Zone Authority’s (PEZA) investment application approvals for incentives, Colliers International said.
“We have 11.1 million square meters of total leasable space in Metro Manila as of first quarter of 2019. It is higher by 0.1 million sq.m…. because of the completion of a few buildings in Quezon City, the Makati fringe, Makati CBD (Central Business District),” Joey Roi H. Bondoc, senior manager for research at Colliers International said during the company’s Q1 2019 Property Market Briefing Thursday in Makati City.
In the first quarter, an additional 151,500 sq.m. of office space became available in Metro Manila, with 48% in the Makati CBD. This is due to the completion of Ayala North Exchange Tower 2 by Ayala Land, Inc. and NEX Tower by the Nova Group, which are both located along Ayala Avenue.
Between 2019 and 2021, he said the average expansion in office space will be one million sq.m. of new completions a year, much higher than the historical average of 400,000 to 500,000.
The positive outlook is supported by the infrastructure projects across the country, which is pushing developers and locators to expand their footprint.
Some projects outside of Metro Manila noted in the report were Clark Railway, due to be completed in the fourth quarter of 2020 for Phase 1 and September 2022 for Phase 2; the Cavite-Laguna Expressway set for completion in July 2020; the Mindanao Railway due for completion in 2021; and the Davao Airport expansion due for completion in December 2021.
Mr. Bondoc noted that PEZA approvals may affect the investment decisions of locators, especially outsourcing companies seeking to expand.
“It largely depends (on) PEZA approvals because, as I mentioned, once a building is PEZA-approved, that will easily be taken up by locators… Vacancies might increase is lack of PEZA (proclamations),” Mr. Bondoc told BusinessWorld after the briefing.
According to the Colliers report, vacancies in the first quarter were at 5.4%. PEZA-registered office space was at 446,000 sq.m., with 72% of the total in Metro Manila, and the remaining in Davao, Iloilo, Pampanga, and Cavite.
Mr. Bondoc added: “We are optimistic because this is a pretty good figure for the first quarter, and it’s spread across the country, although the bulk is still in Metro Manila. But look at the provinces that got PEZA approvals. We are optimistic more will be approved soon.”
Meanwhile, office space in the so-called Bay Area along Manila Bay is expected to exceed 1 million sq.m. by 2020, four times its 2016 level, just before a surge in demand from Chinese offshore gaming companies.
Colliers noted that 50% of the space due to be completed in the next three quarters has been pre-leased to offshore gaming companies.
Overall, demand largely came from other occupiers like government agencies, other companies, and firms offering flexible working space, accounting for 35% of the 72,000 sq.m. net take-up recorded during the quarter. Gaming companies accounted for 29%, knowledge process outsourcing (KPO) companies 23%, and Voice companies 13%.
Rent is expected to increase by about 5% annually from 2019 to 2021. “We see faster acceleration of rent in the Bay Area and the fringes of Makati and Ortigas due partly to offshore gaming operations, but this should be offset by slower acceleration in sub-markets with higher vacancy,” Colliers said. — Vincent Mariel P. Galang