![](https://investingbusinessdaily.com/wp-content/uploads/2023/12/office-room-300x200-w9Z7NW.jpeg)
Amplifying office recovery (part 2)
This is the second of a two-part article. Read the first part here: https://tinyurl.com/yqt6mpyk
Q3 TRANSACTIONS UP 15%
As of the first nine months of 2023, office space deals in Metro Manila reached 501,200 square meters (5.4 million square feet), up 2% year on year. We recorded 227,300 sq.m. (2.4 million sq.ft.) of office transactions from traditional occupants followed by outsourcing companies with 185,100 sq.m. (2.0 million sq.ft.) of closed deals.
In the third quarter of 2023 alone, we recorded 196,600 sq.m. (2.1 million sq.ft.) of office deals, up 15% quarter on quarter. Companies that employed flight-to-value strategies accounted for more than a third of closed deals during the quarter followed by expansion and new set-ups.
The Bay Area, Ortigas central business district (CBD) and Makati CBD dominated transactions in the nine-month period, accounting for 56% of total office deals in Metro Manila. Among the notable deals in the third quarter of 2023 include spaces occupied by Philippine Amusement and Gaming Corp. (PAGCOR) and TSA Group in the Bay Area, Bytedance in Fort Bonifacio, Greatwork in Ortigas CBD and Singa Ship Management in Makati CBD.
SUSTAINED PROVINCIAL DEALS
We continue to record office space deals outside of Metro Manila. In the third quarter of 2023, office transactions reached 66,200 sq.m. (712,300 sq.ft.), higher than the 56,100 sq.m. (603,600 sq.ft.) of deals posted in the second quarter of 2023. As of the first nine months of 2023, provincial deals reached 148,500 sq.m. (1.6 million sq.ft.), up 3%. Cebu accounted for nearly half of the total deals outside of the capital region followed by Pampanga (22%) and Laguna (8%).
Some of the notable transactions outside Metro Manila during the quarter include office space taken up by Foundever, Sansan Global Development and Kuehne & Nagel in Cebu, Ubiquity Global Services in Bacolod, and Afni Philippines in Laguna, the company’s first foray outside Metro Manila.
SUPPLY-DRIVEN VACANCY
The vacancy rate as of the third quarter of 2023 rose to 18.7%, up from 18.4% in second quarter of 2023 as we recorded the completion of 202,100 sq.m. (2.2 million sq.ft.) of new office space and new lease terminations from Philippine Offshore Gaming Operators (POGO).
By end-2023, we expect vacancy to rise to 21.2% as we still project the delivery of about 276,400 sq.m. (3.0 million sq.ft.) of new supply in the fourth quarter of 2023. In 2024, vacancy is still likely to remain elevated as we project new supply to continue outstripping demand.
Net take-up in the third quarter of 2023 reached 17,200 sq.m. (185,100 sq.ft.). Net absorption as of the first nine months of 2023 reached 154,000 sq.m. (1.7 million sq.ft.), up 50% from 102,500 sq.m. (1.1 million sq.ft.) a year ago. Colliers retains its projection of 220,000 sq.m. (2.4 million sq.ft.) net take-up in 2023.
RENTS TO DROP BY 2% IN 2023
In the third quarter of 2023, average office lease rates in Metro Manila dropped by 0.5% quarter on quarter.
While some business districts (i.e., Fort Bonifacio and Makati CBD) continue to see a recovery in rents, other submarkets with significant amount of available spaces such as the Bay Area and Alabang are likely to experience further decline in rents.
In 2023, we projected rents to drop by another 2%, after plunging by 37% from 2020 to 2022. Rental behavior is still dependent on a variety of factors including but not limited to building occupancy, landlord portfolio vacancy, size of the requirement, lease term etc.
Kevin Jara is associate director for office services – tenant representation at Colliers Philippines.