Metro Manila’s office market showed improvement in 2021 as seen in the increase in overall volume of leasing transactions. There were some bright spots in the office market, including flight-to-quality moves and expansions of certain IT-BPM locators and companies from industries that not only survived but thrived during the Covid-19 pandemic.
Prior to the Covid-19 pandemic, the Metro Manila office market rode a wave of momentum that peaked in 2019 when 903,000 square meters of new office supply was completed and 1.5 million square meters of leasing transactions were done. Landlords across the various cities in Metro Manila pursued the rapid construction of their office developments in order to capitalize on the record-high take-up from IT-BPM locators and Philippine Offshore Gaming Operators (POGOs) alike. This led to the accelerated development of new business districts, such as the Bay Area, a reclamation area on Manila Bay in Pasay and Parañaque, where residential and office towers quickly sprouted all over.
This trend was quickly turned on its head in 2020 when the pandemic forced numerous occupiers to cancel their expansion/relocation plans and surrender office space. Both trends lasted for 2 years as evidenced by the negative annual net take-up during both 2020 and 2021. Both traditional and business process outsourcing (BPO) occupiers shed space either due to business downturn or space optimization in light of work-from-home arrangements.
On the other hand, POGOs, who had previously accounted for one-third of the annual office take-up, were now the primary drivers of the increasing market vacancy. POGO operators struggled to populate their office facilities due to labor issues stemming from travel restrictions and crackdowns towards gambling in mainland China. This ultimately led to several POGO operators pre-terminating their leases, or worse, exiting the Philippines completely.
Still, there were some bright spots in the office market as there were notable transactions driven by the flight-to-quality moves and expansions of certain IT-BPM locators and companies from industries that not only survived but thrived during the pandemic (e.g., logistics, e-commerce, telecommunications). The market situation also showed improvement in 2021 as seen in the increase in overall volume of leasing transactions.
Looking ahead, 2022 promises to be a better year as the nation reaches widespread vaccination coverage and continues to ease restrictions, allowing more parts of the economy to reopen and get back on its growth trajectory. Colliers is optimistic that office leasing transactions will continue to improve in 2022, driven by the pent-up and new demand from BPOs, growth of traditional occupiers, and the possible return of the POGOs.
