Property consultancy firm Colliers International Philippines said Thursday office space and mall vacancies in Metro Manila are widening and rental rates are falling after the global health crisis led to the closure of several Philippine offshore gaming operators and retail stores.
CIP senior manager Joey Roi Bondoc said in a briefing mall vacancies in Metro Manila could peak to 14 percent by end-2020, a record after the 1997 Asian financial crisis.
Bondoc said retail vacancy as of the third quarter reached 12.5 percent as the pandemic reduced mall traffic by 30 percent to 50 percent and closed down some stores.
Rental rates in 2020 could also decline by up to 10 percent, a deeper reduction compared to the 7-percent drop during the global financial crisis in 2009, according to CIP.
Bondoc said the decline in mall vacancy and rental rates was expected to continue until 2021, with the recovery still expected in 2022.
He said because of the scenario, mall developers opted to delay the completion of several projects.
Data showed there were 7.3 million square meters of retail space in Metro Manila as of end-September, with only 53,000 sq.m. of retail space opening this year.
Meanwhile, Colliers said the office vacancy was expected to hit as high as 8.3 percent this year following the exit of Philippine offshore gaming operators and the rationalization of operations by business process outsourcing companies.
Colliers said this would be the highest office space vacancy rate since the 8.6 percent posted in 2009 during the global financial crisis.
“We continue to see a challenging market. POGOs have been vacating space, while some traditional and outsourcing firms have either closed shop or are rationalizing their footprint with remote working in the short-to medium term,” Colliers said.
Bondoc said some 154,000 sqm of office space were vacated by POGOs as of end-September this year following tax issues and regulatory roadblocks. About 74 percent were located in the Bay Area, Alabang, Quezon City and Ortigas.
He said because of the sluggish pre-selling and cost containment measures, new office completion in 2020 would likely reach 385,000 sqm, down by 64 percent from the original forecast of 1.07 million sqm.
Office rents are also expected to go down by 17 percent this year.
“Existing tenants have been shelving expansion plans and rationalizing office requirements, compelling landlords to lower rates. Hence, Colliers retains its projection of a 17-percent drop in rents in 2020, before a 2-percent rise in 2021,” Colliers said.
Leasing activity continued its downward trend with net take-up turning negative in the third quarter, or −191,300 sqm. This marked the second consecutive quarter that CIP recorded a negative net take up in 2020.
A negative net take-up means that vacated office spaces outstripped absorbed or occupied offices during the period.
“In the first nine months of 2020, we recorded a net take-up of −113,000 sqm from about 605,600 sqm absorbed in the same period in 2019. This translates to a Metro Manila office vacancy of 7.1 percent as of the third quarter from 4.3 percent posted by the end of 2019,” it said.
The offshore gaming firms returned 154,000 sqm of office space as of the third quarter. Of the spaces vacated by POGOs, Quezon City accounted for 40 percent or 61,000 sqm, followed by Bay Area (41,000 sqm or 27 percent), Alabang (20,000 sqm or 13 percent), Makati CBD (13,000 sqm or 8 percent) and Ortigas CBD (10,000 sqm or 7 percent).