Impact of the Designation of the Recommender for a Workplace LOR for MS
While a letter from the manager is probably a bit better, I doubt that the marginal difference is what will put you over the line for acceptance or hold you back. I assume that you have plenty of other aspects to your background that makes you suitable for the new degree. So make sure that your letters and CV stress those positive aspects. 

However, if you are committed to leaving, then the reaction of your manager probably means less, as long as he/she is honorable. "Sorry to see this employee go" is a fairly good thing to see in a letter. But you have to judge the overall effect as you know the person. 

Just make sure that everything else is enough to make you acceptable as a candidate. Then the letter from the colleague should be fine, and, as you say, they have better knowledge of your contributions.