Leasing Terminations on a Decline, Office Market Bounces Back

With terminations going on a decline, the Philippine office rental market is bouncing back amid the pandemic, Leechiu Property Consultants (LPC) reported, the figures cited in Business World

According to the top consultancy firm, leasing contractions are at their lowest in the last 18 months, down by 69 percent. Terminations slumped to 42,000 square meters in the third quarter from the second quarter. 

Gross leasing activity in the first nine months of 2021 hit 383,000 sqm, which represents 98 percent of the full-year demand in 2020. The demand is likely to reach 450,000 to 500,000 sqm by the end of the year.

In the third quarter, rental interest softened given the steep rise of COVID-19 infections and stricter community quarantine protocols in the capital region. It was in August that the government placed Metro Manila and a few surrounding provinces under hard lockdown, in response to the highly contagious Delta variant.

The number of active leasing transactions to be completed within the six months, however, makes up for this third quarter setback, reaching 228,000 sqm of office space. About 70,000 to 100,000 sqm will be finalized in the remaining months of the year.

Meanwhile, Lamudi data shows that office listings supply is on an upward trend. In the third quarter, the number of available office spaces went up by 14 percent from the second quarter. 

Office Demand

Based on LPC’s figures, the Information Technology and Business Process Management (IT-BPM) sector represents a significant share in the total live leasing requirements in the next six months. Occupying 129,000 sqm of space, it makes up more than half of the total at 57 percent. 

The Philippine Offshore Gaming Operators (POGOs), meanwhile, accounted for 5 percent of the inquiries LPC received. The consultancy firm believes that the new law regulating the industry, Republic Act 11590, as well as the opening of the travel borders, can entice POGO players to set up shop in the country and lease commercial spaces. According to LPC, the recently passed legislation was “well-received” by operators.

Commercial Hotspots

In terms of the most active locations, Metro Manila remains to be the lead. Approximately 75 percent of the year-to-date office transactions were in the capital region. This translates to 289,000 sqm of space, exceeding the transactions documented last year, which hit 266,000 sqm. 

The remaining 25 percent of office transactions, about 94,000 sqm, were recorded in provincial areas. Iloilo represented a significant portion of the total office demand in areas outside Metro Manila, about 39 percent or 37,000 sqm. Clark came in second with 14 percent or 13,000 sqm, followed by Laguna with 12 percent or 11,000 sqm. Davao represented 10 percent of the demand at 9,000 sqm. Finally, Cebu recorded 8,000 sqm, accounting for 8 percent of the total.

Residential Interest

The return to the office will likely contribute to continued office market recovery. At the same time, it can promote strong residential demand. According to the latest Lamudi trend report focusing on the rental market landscape, transit-oriented spaces have the potential to attract property seekers. 

The Lamudi data on proposed Metro Manila Subway stations shows that more people were looking into rental properties in the second quarter of 2021. Locations that are near mass transport hubs, namely Ortigas Avenue, West Rembo, and Western Bicutan, were predominantly rental markets from the first quarter of 2020 to the second quarter of 2021.

Notably, Ortigas Avenue has convenient access to the MRT-3 line and the proposed MRT-4. West Rembo is near the BGC-Ortigas Bridge and between the Guadalupe and San Joaquin ferry stations. Western Bicutan, meanwhile, hosts the Philippine National Railway – FTI Station.

The residential interest remained strong even at the height of the pandemic last year, with large-scale enterprises taking up temporary spaces and providing on-site housing for their staff.

For real estate brokers, the recovery of the office market and the resilience of the residential segment provide an opportunity to promote rental properties. In line with this, Lamudi has extended its Unli Rental Listings Promo from October 31 to the end of the year, December 31. CEO Kenneth Stern encouraged real estate practitioners to take advantage of the limited-time offer and tap into Lamudi’s extensive local and international reach.

Source: Business World

Photo via DepositPhotos


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