By Roderick L. Abad
OFFICE tenants are advised to plan ahead for their future leasing space requirements as current occupancy is getting tighter, according to a top executive of a property consulting firm.
Jones Lang LaSalle (JLL) International Director David T. Leechiu made the suggestion during the company’s announcement of its Mid-year Market Report for this year. He said transactions on office-space leasing are currently happening with companies pre-committing to 2016.
“The amount of pre-commitments that are happening today for office space next year, it’s something like 230,000 square meters and 250,000 sq m. And if these deals will just happen, that’s going to translate to about a 50-percent to 60-percent uptake of the office space in the next two months for office space next year,” he said, while citing the possibility of closing the transactions between July, August and September of 2015.
“And next year has gotten a lot of stock coming online. And so we’re always telling tenants now to always think about your space needs one or two years ahead of time,” he added. The office segment of the real-estate industry in the Philippines has so far “performed very well,” as seen in the strong supply and demand from the market. Out of this year’s total supply of 745,390 sq m of office space in Metro, Manila, 506,574 sq m, or 67.9 percent, have already been leased out as of July 1 based on the latest industry report of JLL.
This is comparable to the total inventory of 579,200 sq m last year, of which 513,800 sq m, or 91.2 percent were rented out.
“So, for the first half of this year alone, we’ve already leased [out] more space than what was leased out in the entire 2014,” JLL Philippines Inc. local director Phillip Anonuevo said.
Meanwhile, vacancy on supply pipeline has stood at around 32.1 percent, or 237,822 sq m. The report also reveals that a running balance of 370,000 sq m is likely to be taken up by the end of the year.
Anonuevo attributed the continuous takeup for office space to the ever-growing business-process outsourcing (BPO) sector, which accounts for 63 percent on JLL transaction in the first half of 2015.
Industry reports showed that the Philippine outsourcing sector had accounted for 6.2 percent to the nation’s total gross domestic product and reached the 1 million full-time employment as of September last year. Expectations remain bullish, given the projected revenue hike by around 15 percent to 18 percent from 2014 to 2016. BPO’s topline is seen to reach $21.8 billion and $25.5 billion in 2015 and next year, respectively, from $24.5 billion last year. Meanwhile, employment is seen to increase from 1 million to 1.1 million and 1.3 million for the three years in review.
Given the projected hike in jobs to be created, the local director of JLL Philippines said this could translate to around 500,000 sq m and 900,000 sq m of office-space requirements this year and in 2016.
Location-wise, Bonifacio Global City in Taguig City is where most of office buildings are under construction this year, and yet, they are already leased through a combination of both BPO clients and corporate companies. Among the preferred sites by locators, he cited that the Bay area has so far performed very well in 2015.
“Five years ago it was hard to think that call centers would want to locate there because the critical masses were not yet there,” the executive said, while noting that there are 38,046 sq m of office space still unoccupied and 64,751 sq m already committed out of an aggregate supply of 102,790 sq m.
“At the rate of things that are going on—even the inquiries for space that we have—Alabang should lease out pretty well by the end of the year,” Anonuevo stressed.