Amplifying office recovery (part 1)

METRO MANILA recorded a marginal rise in office vacancy due to the completion of new office buildings and spike in vacated spaces in the third quarter of 2023.

Colliers continues to record deals from traditional and outsourcing firms implementing a mix of flight to quality and flight to cost measures.

For the first nine months of the year, office transactions outside Metro Manila recorded flattish growth, with Cebu, Pampanga, and Laguna cornering bulk of closed transactions.

Moving forward, we see greater opportunities for expansion in key areas outside Metro Manila as occupants maximize the second and their tier cities’ skilled talent pool and improving infrastructure network.

Colliers encourages occupiers to continue complementing their workplace strategies with flexible workspace options. Landlords should remain flexible in offering commercial terms to capture demand from occupiers considering flight-to-value measures. Landlords should also align with occupiers’ environmental, social, and governance (ESG) and diversity, equity, and inclusion (DE&I) goals and continue implementing innovative programs to further support their tenants’ return-to-office (RTO) initiatives.

ALIGN WITH ESG AND DE&I GOALS
With the heightened importance on sustainability and inclusivity in the workplace, landlords must align with tenants on their ESG and DE&I goals.

Colliers encourages landlords to be more proactive in implementing and promoting ESG and DE&I elements within building amenities and common areas. This can be in the form of green features and certifications, landscaping, renovation of shared facilities and landlord-initiated events that support the wellness and productivity of employees.

TENANT ENGAGEMENT ACTIVITIES
As companies are now encouraging their employees to return-to-office, landlords have a role to play in rekindling the attractiveness of return-to-office, which can be done through tenant engagement events that promote the well-being of employees.

Landlords may take advantage of creating events around the coming holidays.

AMPLIFY FLIGHT-TO-VALUE STRATEGY
Based on Colliers’ third quarter 2023 data, several companies implemented flight to quality/cost strategies.

Among these are traditional and outsourcing firms that took up spaces in Fort Bonifacio, Makati central business district (CBD), and Ortigas CBD. These firms took advantage of a market that remains tenant-leaning and maximized the opportunity to lease new, high quality office spaces in major business districts at lower rents.

Colliers believes that given the prevailing market conditions, opportunities remain for tenants to implement flight-to-quality strategies at a lower cost due to decreased rents brought about by the pandemic.

In our view, now is an opportune time to secure space in locations with substantial supply of new and quality office spaces. Given the current stock of vacant spaces and new office towers to be completed in the next 12 months, we encourage tenants to consider office spaces in Fort Bonifacio and Ortigas CBD.

Occupiers may also consider flexible workspaces in either their flight-to-value strategy or rationalization of their current office real estate. Colliers encourages occupiers to review their real estate strategies ahead of lease expiry to take advantage of high vacancy in the market, especially with our still elevated forecast for 2023 and 2024.

(To be concluded next week)

Kevin Jara is associate director for office services – tenant representation at Colliers Philippines.