JLL: Metro Manila office market sees smaller leases despite recovery

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While the office leasing market has been recovering from the huge vacancies left by the exit of the POGO sector, tenants are seen to be taking smaller bites of new offices as their requirements have been reduced due to flexible work arrangements preferred by employees.

In a media briefing, Janlo delos Reyes, research head of real estate services firm JLL, pointed out that, even though companies have required their workers to return to the office, space take-up may be more subdued in the coming years.

While companies used to take up huge chunks of more than 10,000 square meters of office space in the past, he said that, “Now it has generally lowered to around 5,000 to 10,000 sq m in terms of transactions.”

“There are even some there that are transacting at around 150 to 300 square meters in terms of space. There will still be expansion activity, but not as aggressive as before, but I guess that's the silver lining, that there will still be demand for office space in the future,” De los Reyes said.

Companies in the financial services sector will drive the demand as the return-to-office (RTO) mandate gains momentum.

The JLL’s latest workforce preference barometer survey showed that the local workforce remains “office-centric,” with 70 percent of employees still working in the office.

Based on JLL’s survey of workers based in Cebu, Davao, Iloilo, Clark area, and Cavite, Laguna, Batangas, around 42 percent of the workforce go to the office five days a week, 21 percent go to the office only two days a week, while 19 percent are at the office three days a week.

JLL’s office leasing has improved in the first half of the year with take up hitting 582,000 sq.m., up 80.2 percent from last year.

Delo Reyes said the business process outsourcing (BPO) industry continued to lead in office space take up, cornering 64.7 percent of the volume for the period.

He noted that, leasing volume is expected to remain stable in the next couple of quarters, and hit 800,000 to 900,000 sq.m. by the end of the year.

In terms of rents, JLL said that rental growth has remained flat with current rate at around ₱973 per sq.m. per month, and likely to dip given the expected influx of additional supply for the rest of the year.

An additional 568,000 sq.m. of space is expected to come online within Metro Manila for the second half of the year.

However, Bonifacio Global City and Makati central business districts continue to command higher rent at P1,200 per sq.m. per month.

Vacancy was recorded at 18.2 percent in the second quarter, lower than the 19.4 percent recorded last year.

“There’s been some tapering of supply over the past three quarters, wherein only 7,000 sq.m. of new space was added in Metro Manila. What we expect though, for the remainder of the year, is that overall vacancy to remain elevated at around 18 percent owing to the large volume of new stock coming in,” delos Reyes said.