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By Maricris Sarino-Joson
THE pandemic has been disruptive to the Philippine economy. Many businesses closed, the economy suffered, and a lot of Filipinos lost their jobs. These factors adversely affected the office market starting in 2020. The vacancies increased across Metro Manila and as a result, rents corrected.
The years 2020 and 2021 were indeed unsettling for the office market. The good news is that we are starting to see some positive trends, with the number of vacated spaces gradually declining and rents in major business hubs starting to recover as we have been recording sustained transactions across Metro Manila.
But what the coronavirus disease 2019 (COVID-19) has ultimately taught us is to be more mindful of our health, whether in public spaces, at home or at work. The health crisis highlighted the need to be in a safe and healthy space, that we shouldn’t let our guard down when it comes to health, and that being in a clean and constantly sanitized environment is a must in a post-COVID world.
For office spaces, there is definitely no compromise. Companies must ensure that employees continue to enjoy the perks of a collaborative workspace, while maintaining their overall health.
This only strengthens the argument for sustainable and healthy office spaces, especially that anti-COVID protocols have been lifted and we are all trying to thrive in a new, hopefully better, normal.
Colliers has seen major occupants, including multinational corporations taking up space in these high-quality, sustainable and healthy office towers. Major information technology and business process management companies are also looking for these office spaces as they encourage employees to gradually return to the traditional office setup; and to heed global management’s directive of occupying sustainable office spaces.
With close contact amongst employees no longer an issue given the availability of healthy workstations and meeting rooms, Colliers believes that taking up spaces in these buildings contributes to fostering a more collaborative work environment.
ENTICING COMPANIES TO LOCATE IN SUSTAINABLE BUILDINGS
Colliers sees an estimated 57% of new office supply in Metro Manila from 2022 to 2024 likely secured Leadership in Energy Environmental Design (LEED), WELL or Building for Ecologically Responsive Design Excellence (BERDE) certifications.
In our view, benefits such as 35% lower carbon emissions, 40% lower water use, 50% lower energy use should encourage more companies to locate in a green or sustainable building. Practicing green architecture can translate into energy savings as well as lower construction costs. Colliers believes that these savings are likely to entice more firms to locate in high-quality and sustainable office towers across Metro Manila.
ADOPTING THE SUSTAINABLE ROUTE TO OFFICE DEVELOPMENT
In 2009, Quezon City implemented a Green Building Ordinance which required the design, construction and retrofitting of buildings, other structures and movable properties to meet minimum standards of green infrastructure that would be eligible for incentives.
Colliers is optimistic that other local government units (LGUs) will follow suit, as these would provide landlords with enough incentives to develop more green buildings.
In our view, there should be a strong public-private partnership in promoting a more aggressive development and utilization of sustainable office spaces across the Philippines.
Occupiers are now more discerning with design considerations. Sustainable features such as filtered air circulation, lowered density ratios, and high glass ratios for natural lighting are among occupiers’ key considerations when choosing a new location.
Other long-term benefits of having sustainable workspaces include a 15% reduction in operational costs due to energy savings (which will likely outweigh the 15% increase in capital expenditure).
DIFFERENTIATING PROJECTS IN A COMPETITIVE OFFICE MARKET
Colliers believes that product differentiation plays a crucial role in ensuring that buildings are appropriate to the needs of the tenants as more options are available in the market and as more landlords pursue sustainable developments.
Developers should be aggressive in highlighting their building certifications and should actively chase occupants that are on the lookout for these sustainable office towers. Aside from offering sustainable office spaces, landlords may consider bundling other concession such as fit-out allowance to entice new and long-term tenants.
NEW SUSTAINABLE OFFICE OPTIONS ACROSS METRO MANILA
Among the sustainable buildings completed across Metro Manila from 2022 to the first half of 2023 include Studio 7, Makati Commerce Tower, and NEX 54.
From the second half of 2023 to 2026, we expect the completion of 1.1 million square meters (11.8 million square feet) of new and sustainable office space, providing enormous options to potential tenants. The additional supply will come from M3 Corporate Center, Hudspace (GH Tower), Pioneer House BGC, Camaro Square, and Columna.
Outside traditional office buildings, developers should ramp up construction of more sustainable office towers to capture demand from large occupiers that put a premium on sustainability.
At present, most of these developments are concentrated in Metro Manila but developers outside the capital region have also started to take the sustainable route to office development.
BEING IN A SUSTAINABLE OFFICE SPACE IS A ‘MUST’
Colliers Philippines believes that these healthy, sustainable office towers play an important role in reigniting interest in the Metro Manila office market post-pandemic. Tenants now see the need to be in these office spaces while developers are actively capturing demand in the market.
We definitely see the urgency to be in these office towers. Being in a sustainable office space used to be a “nice-to-have,” now it is a “must-have.”
For now, we can conclude that when it comes to office leasing and development, sustainability is everyone’s responsibility.
Maricris Sarino-Joson is the director for office services-landlord representation at Colliers Philippines.