Transaction activity in the local office sector is expected to continue improving next year, driven by potentially sustained demand, real estate consulting firm Colliers said.
“Transactions have been increasing by about 10-15% quarter on quarter. We think this will continue until next year,” Colliers Associate Director for Office Services Kevin Jara said.
“We don’t see any regulatory headwinds, political headwinds,” he added.
Mr. Jara said, however, that there might be a slight slowdown in demand during the US elections towards the end of next year, attributed to the significant demand for outsourcing.
“During those months, there’s a slight slowdown but usually recovers after the season,” he noted.
Office space transactions for the third quarter stood at 197,000 square meters (sq.m.), which is 17% higher than the 169,000 sq.m. in the same period last year, data from Colliers showed.
About 167,000 sq.m. of vacant spaces were recorded during the period, higher than the 137,000 sq.m. seen in the previous year, mainly driven by the completion of new office buildings. Occupied office spaces, on the other hand, reached approximately 11.3 million sq.m.
Mr. Jara said that office demand next year is likely to be driven by the business process outsourcing (BPO) sector, especially as companies seek to grow their headcount.
“The BPO industry has a roadmap to double their headcount until 2028. So, it’s just a matter of if those additional head count will translate into office space,” he said. “But regardless, it’s still going up.”
In the third quarter, traditional offices comprised the majority of office space deals at 98,000 sq.m., including government agencies, telcos, insurance firms, and flexible workspace operators, the property consultancy firm said. The figure has risen from 69,000 sq.m. previously.
The information technology and business process management sector recorded 70,000 sq.m. of transacted spaces, lower than the 93,000 sq.m. a year earlier.
Philippine offshore gaming operators reportedly transacted about 29,000 sq.m., an increase from the 7,000 sq.m. last year, but still lower than the 55,000 sq.m. transacted in the second quarter.
During the third quarter, the demand rose by 10.78% to 185,000 sq.m. of office spaces from 167,000 sq.m. in the third quarter last year and 170,000 sq.m. in the second quarter of 2023.
“We’re also expecting more and more companies, not just BPOs, to do a flight-to-quality relocation. Take advantage of the market because you have potentially cost-effective rental costs in a new building versus your current lease which may have pre-pandemic rents pa which are higher,” Mr. Jara said.
In the first nine months, Colliers reported that about 155,000 sq.m. of office space relocations were recorded, of which 69% were flights to quality, while 31% were flights to cost.
Flight-to-quality relocations refer to moves to newer, higher-grade buildings, which are mostly in primary submarkets, while flight-to-cost relocations involve moves to older, lower-grade buildings with lower rents, typically in secondary submarkets.
Source: Business World