In its latest regional report, Colliers expects overall Philippines demand and supply reverting to pre-POGO levels due to the economic recession brought about the coronavirus and the government’s reluctance to allow the resumption of POGOs.
“We project a net take up of not more than 386,000 square metres in 2020, much lower than the 927,000 square metre of annual office demand from 2017 to 2019,” said Colliers.
Colliers said the country posted an average take up 480,000 square meters a year from 2014 to 2016 or before President Rodrigo Duterte gave out licenses for Chinese firms to run offshore casinos from the Philippines.
Colliers expects new supply to fall to 530,000 square meters this year, the lowest annual new supply since 2016 and just half of the 1.07 million square meters it had estimated at the start of the year.
With the oversupply in office space, Colliers observed that landlords have been more than willing to lower rents, between 20 and 30 percent discount for non-POGO firms, to boost occupancy in their buildings.
“With a general slowdown in leasing activity all over Metro Manila following reduced space demand from POGOs, outsourcing and traditional firms, coupled with willingness among landlords to drop rents, Colliers retains its forecast of a 17 percent correction in lease rates in 2020. This is likely to be more apparent starting from the fourth quarter in 2020,” said Colliers.
Colliers expect vacancy rates to soar to 5.3 percent after office space take-up of business process outsourcing (BPO) tenants dropped 54 percent to 91,000 square meters in the first six months in 2020.
Demand gaming, which accounts for 30 percent of the market, nosedived 71 percent to 79,000 square meters in the first half.
“But you have to note that these transactions covered pre-leasing during the first few months of 2020. The challenge is will they have new employees for the remainder of 2020. We have to note that travel restrictions to and from China has been constricting these companies to expand and employ Chinese POGO employees,” Colliers said.