OFFICE vacancies in Metro Manila will likely continue to rise despite stable demand, due to the spillover effect of excess supply left over from 2022, according to JLL Philippines.
With inflation at 8.1% as of December, future interest rate hikes will put even more pressure on the market as intense competition grows among occupiers and buyers, JLL Philippines head of research Janlo C. de los Reyes said at a briefing on Thursday.
“This means higher development and operational costs for developers, and slower decision making for investors,” he added.
Office leases in Metro Manila rose 67% year on year to 669,000 square meters (sq.m.) in the fourth quarter, JLL said.
He said the leasing environment was steady between the first quarter and third quarter of 2022, before “the drop in climate in Q4,” he added.
New leasing volume in the fourth quarter was 150,000 sq.m., down 32% from the previous quarter.
Leasing decisions were hampered by the economic headwinds as well as the continued work-from-home arrangements of BPO (business process outsourcing) companies, Mr. De los Reyes, said, adding that leasing levels will stabilize in 2023 as the market recovers.
Hybrid work models have also become a non-negotiable element in office space decision-making, JLL Philippines office leasing advisory head Lizanne H. Tan said.
She added that 56% of corporate occupiers globally are implementing hybrid work models.
“In Manila, we’ve seen an increase of demand for flexible space. A lot of times, the locations that companies are looking into at are closer to employees’ homes rather than in major central business districts,” she said.
JLL also noted that Metro Cebu leasing volume was about 129,000 sq.m. in 2022 due to the expansion of IT-BPO companies.
“Across the country, we expect these companies to support remote working through technology. Many organizations are now planning to make remote working permanently available to their employees,” Ms. Tan said. — Brontë H. Lacsamana