Office vacancy rates might go up next year

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Vacancy rates in the Metro Manila office market are expected to rise in the next 12 months, as office space might outpace office demand, according to two global real estate services firms.

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“While demand from both traditional and BPO office occupiers are seen to grow steadily, all-time highs in office space completion are slated each year from 2015 to 2017, surpassing the projected demand,” Colliers International said.

Colliers noted that around 733,765 square meters of new office space is expected to enter the market in 2016, while around 782,526 square meters is expected to enter in 2017.

“Makati CBD vacancies are anticipated to rise to 4.4 percent by the end of 2016, while vacancies in Fort Bonifacio, where 43 percent of the new stock for the year will be located, is seen to climb 10.8 percent,” said Colliers.

Meanwhile, Cushman and Wakefield noted that in the third quarter of 2015, Grade A office stock increased by 1.8 percent quarter-on-quarter to roughly 4.6 million square meters.

“The stock was lower than expected, as delays in construction and securing of occupancy permits pushed the completion of some buildings into the tail-end of the year,” the firm said.

But it said the business process outsourcing (BPO) and knowledge process outsourcing (KPO) sectors would help maintain marginal growth in vacancies, as these sectors had accounted for most of the take-up this year.

“The projected stable growth of the BPO and KPO industries is expected to maintain marginal growth in office vacancies across Metro Manila,” said Cushman and Wakefield. “Consequently, the projected stable growth of office demand is expected to buoy moderate average rental rates over the course of the next year.”

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