Office space absorption in the Metro Manila market is seen to nearly double to 220,000 square meters this year from 110,500 sqm last year driven by demand from outsourcing firms, according to Colliers Philippines.
“In 2023, we project net absorption to reach 220,000 sqm as we expect the healthcare, logistics, finance, telecommunications, government and shared service segments to drive office space demand,” Colliers Philippines said in its latest office market briefing.
While the 2022 figure is lower than its earlier forecast of 140,000 sqm, the property services firm pointed out that it was a turnaround from the negative net absorption in the past two years.
“Metro Manila office space deals continue to increase despite concerns of rationalized office space requirements from outsourcing companies implementing hybrid work arrangements,” Colliers said.
Colliers urged landlords to take advantage of healthcare outsourcing firms’ office space requirements, particularly those looking for high-quality spaces being offered at a discount.
It added that around 23,800 sqm of office transactions were registered from healthcare information management services (HIMS), or nine percent of total outsourcing transactions in Metro Manila in 2022.
Among the firms that expanded and took up new space include R1 RCM in Quezon City and Tenet Healthcare in Fort Bonifacio.
“In our view, these firms took advantage of the availability of new, high-quality spaces and rental correction, as average rents in Metro Manila have dropped by a combined 37 percent from 2020 to 2022,” Colliers said.
It cited insights from Carelon Global Solutions Philippines country head Nora Terrado, who said the HIMS sector is expected to grow between 10 and 13 percent this year.
“Colliers recommends that landlords actively monitor demand from HIMS that are likely to expand and take up office space within and outside Metro Manila,” it said.
In terms of new supply, Colliers projects around 641,100 sqm of new office space to be added to the Metro Manila office supply this year.
“Colliers sees Ortigas central business district and Quezon City covering about close to half of the new supply during the period,” it said.
From 2023 to 2026, Colliers expects new supply to taper off and revert to pre-POGO (Philippine Offshore Gaming Operators) levels, where it sees the annual average delivery of 555,000 sqm.
The additional supply is seen to further increase vacancy level to 20.2 percent this year from 18.8 percent vacancy registered last year.