With the recent slowdown of direct Business Process Outsourcing (BPO) investments in the country and the unusual rate of occupancy by offshore gaming companies of Manila’s office leasing market, Colliers international stated that the market is shifting and in turn, less favorable for landlords who own office spaces.
According to Dinbo Macaranas, the senior research manager at Colliers Philippines, while the availability of office spaces have reached a record high, the booming aggressors that are offshore gaming companies who have contributed to a considerable ratio towards the leased office markets – remain unproven when it comes to growth and sustainability. Add to the fact that there are more office spaces available than the current rate of take up, results to the consequential flattening of rental rates in Manila.
The landlord or lessor setup has long been a market model for office spaces in the late 80s and 90s when it comes to the office leasing market in the Philippines. Fast forward 2010 and beyond, the entry of serviced offices and co-working spaces have dynamically altered the office leasing market where liquidity of available space and mobility of transfer with flexible lease agreement have enabled even small foreign companies to host startup operations in the country.
Colliers also echoed the same sentiment in which the company noted that as of the 3rd quarter of 2017, property vacancy rates have breached the 5.6 rate and the company sees vacancy rates are still peaking by next year.
“Looking ahead to 2018, we expect vacancy to move up to the 8-percent range as supply will be largely unchanged from the current 900,000-square-meter projection, regardless of whether developers attempt to postpone project completions or not. For 2019 to 2020, should developers’ plans push through and demand stays flat, we expect vacancy to reach the mid-teens level—not exactly ideal for them,” the research was quoted by the Inquirer Business.
With vacancy rates still projected to up by as much as 8 percent, Colliers see this as a market opportunity for tenants as there are no imminent indicators for rate increase in the property rental market.
Relative to the vacancy rates is still a robust and healthy demand rate for office spaces with the BPO industry, newcomers like offshore gaming companies gaining more traction as new licenses for offshore operations are expected to be issued by January 2018.
Meanwhile, the office leasing market locally remain competitively low compared to the North Asian market where Hong Kong and Tokyo office rental rates continue to soar among the world’s highest rate while metropolitan cities like Dubai. Doha and Beijing are also seeing rising rates for office space rental rates.
The vacancy of office spaces in Manila with a relative healthy rate of occupancy opens up various stimuli scenarios for the market where flat rates and available spaces are prime conditions to attract new tenants in an offshore setup.
Ezy Outsourcing Hub is a gateway service for setting up outsourcing and offshoring operations in the country. Part of our service offering is the facilitation of serviced offices in the Philippines. To get started in 2018, call us today AU +61 419 200 663 | PH+63 917 5680402 or email firstname.lastname@example.org.
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