Property firm expects only half of new office space completed in 2020

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Metro Manila (CNN Philippines, August 3) — A property consultancy firm has projected that only 50 percent of new office space will be completed this year due to the impact of the coronavirus pandemic.

Colliers International Philippines said in a report that new office supply for 2020 is seen to reach only 532,600 square meters (sq.m.) from its initial forecast of 1.07 million sq.m. for the year. The firm said “manpower shortage, physical and other anti-COVID measures implemented in construction sites, slow pre-commitment of some buildings, and developers’ cost-cutting measures” are factors that will contribute to slow completion.

Specifically, it noted that both Philippine Offshore Gaming Operators and outsourcing firms have been exhibiting slower pre-leasing, which is more observed in these Chinese companies due to travel restrictions.

Moreover, buildings that were already in advanced phases in the first quarter are now delayed by at least two quarters from their original dates of completion, while those that are in early stages may be put on hold or delayed as well as companies limit capital expenses.

Meanwhile, Colliers said vacancy rate for the second quarter was at 4.9 percent, the highest since third quarter 2019 at 5 percent, due to “slower leasing from all segments and a rise in vacated spaces.”

Total transactions for the first two quarters reached 261,100 sq.m., down by 64 percent from the same period last year.

However, Colliers said it is expecting higher-value knowledge process outsourcing firms to take up the remaining Philippine Economic Zone Authority-approved spaces in the capital, while traditional firms and major outsourcing firms are likely to take up spaces in non-core locations like Quezon City to minimize cost.

With the lower supply projection, vacancy in Metro Manila is likely to increase to 5.3 percent this year, a little lower than the initial 5.5-percent estimate.

As for rentals, Colliers reported a 17 percent correction in leasing rates in 2020, which will be more observed in the fourth quarter.

“However, an upside is that the central bank is projecting some form of economic recovery starting in Q4 2020,” the firm said, noting that this will be complemented by expansion of outsourcing firms to comply with health safety protocols, like social distancing.

This is expected to result in a 2 percent growth in rents beginning 2021, Colliers said.