Real estate vacancy rate seen widening as more POGOs exit

Leasing rates will bottom out this year as vacant office spaces and residential units are expected to widen on the prolonged impact of the pandemic and continued exit of companies engaged in offshore gaming, consultancy firm Colliers Philippines Inc. said Tuesday.

Colliers Philippines said office vacancy would reach 12.5 percent this year as more Philippine offshore gaming operators moved out and business process outsourcing companies rationalized their office space requirements.

Colliers Philippines senior research manager Joey Bondoc said in a virtual presentation the subdued leasing across all segments would result in correction in leasing rates.

“We expect office leasing rates to bottom out in 2021 before a recovery in 2022,” Bondoc said.

He said about 886,200 square meters of new office space would be completed this year, bulk of which would likely come from the Bay Area and Ortigas central business district.

Colliers Philippines said while offshore gaming firms continued to vacate office spaces, companies engaged in manufacturing and essential goods would drive space absorption this year.

It said the slowdown in office space absorption would also affect residential demand.

The group said it was expecting residential vacancy to accelerate to 16.9 percent this year from 15.6 percent in 2020.

Bondoc said residential prices and rental rates would recover only by 2022, when office leasing would pick up.

More than 10,000 condominium units are slated for delivery this year, 74 percent of which would be in the Bay Area followed by Bonifacio Global City, Alabang, Ortigas and Makati.

Colliers Philippines said while the residential market catering to the low-income group was affected by the pandemic in 2020, the mid-income and luxury market remained strong.

It said that in 2020, the residential take-up hit a seven-year low of 31,000 units, while launches reached 21,000 units.

The mid-income to luxury market accounted for 86 percent of residential sales in 2020, up 72 percent from 2019.

Residential sales to the affordable and low-income market accounted for 11 percent in 2020, down from 26 percent in 2019.

Meanwhile, the outlook for the hotel sector remained bleak as occupancy was expected to remain 30 percent this year with international and domestic travels unlikely to recover in the next 12 months.

Hotel completions are being delayed with only 1,020 rooms expected to be delivered this year, lower than the pre-pandemic projection of 2,160 rooms.