With increased business confidence, greater vaccination coverage, and the passage of several economic stimulus measures, Metro Manila’s office market is poised to start recovering in 2022
Following two consecutive years of negative net take-up, the Metro Manila office market appears to be turning a corner as net take-up is projected to land in the positive territory in 2022. Net take-up, which is the change in occupied space between two periods, is forecasted by Colliers to reach 307,000 square meters in 2022, a significant improvement from the net take-up of –273,000 square meters recorded in 2021.
The projected positive absorption is expected to be driven by demand from traditional and IT-BPM locators. Colliers believes that the recovery of office demand will be boosted by the improved business confidence, greater vaccination coverage, and passage of several economic stimulus measures.
Key drivers contributing to positive net take-up
Business confidence is expected to improve in 2022 as community quarantine classifications are likely to be lowered and society learns to live with the virus. First rolled out in September 2021, the country is currently implementing the alert level system, which involves granular lockdowns on areas experiencing case surges rather than broader lockdowns covering larger areas. This approach quelled two of the largest surges of Covid-19 cases in September 2021 (Delta) and January 2022 (Omicron) while allowing the country’s economic activities to continue.
The Philippines reported GDP growth of 7.7% in the fourth quarter of 2021 and 5.6% for the whole year. Economic growth and consumer activity increase when restrictions are eased, and this resurgence is expected to persist in 2022. This will bode well for the country’s ability to attract investments and will be beneficial to the office market as the reopening and expansions of businesses will spur the demand for office spaces, slow down lease cancellations and non-renewals, and, eventually, lead to higher occupancy in the market.
Greater vaccination coverage has also been integral to the return of business confidence and is noted to drive the decrease of Covid-19 cases in the country. With approximately 56% of the total population fully inoculated against Covid-19, Colliers believes that the stage is set for parallel growth between the economy and office take-up in 2022.
Alongside the health protocols in place, the government has also introduced notable pieces of legislation to jumpstart the economy, namely, the CREATE Law, amendment to the Foreign Investments Act (FIA), amendment to the Public Service Act (PSA), and Retail Trade Liberalization Act (RTLA). These legislative measures are expected to provide certainty on the country’s investment climate, liberalize the economy, ease restrictions on investors, and increase foreign direct investments. Salient provisions in these legislations, such as reduced corporate income taxes (CREATE), easing of investment requirements for foreign retailers/public service providers (RTLA/Amendments to PSA), and increase in allowable foreign ownership (FIA), will lead to an influx of investments to the Philippines. As foreign players set up their headquarters or local operating centers in the country, the demand for office space is also expected to increase. Furthermore, IT-BPM locators are expected to trigger expansion requirements as companies in developed economies such as the United States resort to outsourcing to manage costs while recovering from the pandemic.
Colliers believes that the Metro Manila office market is set for recovery into positive net absorption in 2022 with the increasing business confidence, wider vaccination coverage, and economic stimulus measures signed onto law. As economic recovery begins and lease cancellations/non-renewals slow down, Colliers encourages landlords and occupiers to work closely towards mutually beneficial partnerships to capitalize on the improved business climate and sustain their growth in 2022 and beyond.
With business and consumer confidence increasing and a number of legislative measures to boost the economy, Metro Manila’s net office take-up is expected to enter positive territory in 2022.