Metro Manila office market surpasses 2023 targets--Colliers

The Metro Manila office market exceeded expectations in 2023, with net absorption more than doubling year-over-year. Transactions continued to surpass lease surrenders, and vacancy levels remained below the forecasted 20% mark despite new supply entering the market.

Colliers International noted deals from traditional and outsourcing firms, with many companies implementing a mix of strategies to enhance quality and cost efficiency. The office market also witnessed a significant increase in expansions (50% of transactions) and new entrants (10% of transactions).

Colliers recommends that occupiers capitalize on current market conditions by investing in modern workspaces for employee well-being. Landlords, meanwhile, should integrate green features and secure sustainability certifications in both existing and future developments. In submarkets with strong performance, landlords may consider constructing more high-quality and environmentally friendly spaces to meet future demand.

Office space deals across Metro Manila reached 827,700 square meters (8.9 million square feet) in 2023, a 37% increase from the previous year's 603,800 square meters (6.5 million square feet). This figure already surpasses half of the pre-pandemic volume recorded in 2019 (1.5 million square meters or 16.1 million square feet). Traditional firms led transactions, accounting for 46% of the total, while outsourcing and Philippine Offshore Gaming Operator (POGO) firms comprised 34% and 20%, respectively.

The Bay Area, Quezon City, and Makati central business district dominated transactions in 2023, contributing to more than half of the total activity in the capital region. Notable deals in the fourth quarter of 2023 included spaces occupied by Samsung in Fort Bonifacio, Foundever in Ortigas Fringe, Optum in Makati CBD, and Fluor in Alabang. Colliers also observed substantial deals from POGO firms, particularly in the Bay Area.

Net absorption

Vacancy reached 19.3% at the end of 2023, slightly higher than the 18.7% recorded in the third quarter due to new office buildings and space surrenders from lease non-renewals and early terminations. In 2024, vacancy is projected to reach 19.6% due to low pre-commitment levels in upcoming buildings and expected surrenders from pre-pandemic leases.

Colliers recorded net absorption of 279,800 square meters (3.0 million square feet) in 2023, exceeding the initial forecast of 220,000 square meters (2.4 million square feet) and the 110,500 square meters (1.2 million square feet) recorded in 2022. The firm remains optimistic that net absorption will gradually improve in 2024, with continued inquiries for new setups, expansions, and relocations within and outside Metro Manila. Colliers projects net absorption to reach 336,000 square meters (3.6 million square feet) in 2024.

New supply

Colliers recorded the completion of 611,700 square meters (6.6 million square feet) of new office space in 2023, lower than the 736,100 square meters (7.9 million square feet) completed in 2022. In the fourth quarter alone, about 279,600 square meters (3.0 million square feet) of new supply became available with the completion of the International Finance Center.