Metro Manila office vacancy likely to fall below 10% by 2028, says CBRE

Metro Manila's office vacancy rate is projected to fall below 10% by 2028, driven by the steady expansion of the information technology and business process management (IT-BPM) sector, real estate services firm CBRE said.

At its Mid-Year Property Market Briefing on Friday, CBRE stated that the Metro Manila office sector is expected to achieve a single-digit vacancy rate by 2028 under two key scenarios.

By 2028, CBRE projects office vacancy could drop to 3.6% if the IT-BPM sector aggressively expands.

CBRE Philippines Country Head Jie C. Espinosa told reporters that the lower vacancy scenario would materialize if the IT-BPM sector maintained its growth of around 10-15% in full-time employees annually.

Under a conservative scenario, office vacancy may fall to 8.3% in 2028, a projection based on historical data from the past three years, which showed demand growth of only about 2.4%, he added.

Office vacancy in the Philippine capital slightly rose to 20.3% in the second quarter from 20.1% in the first quarter.

This comes as demand in the Metro Manila office market declined by 1% to 219,400 square meters (sq.m.) in the second quarter from 221,810 sq.m. in the previous quarter.

Third-party outsourcing firms drove office demand during the April-June period, particularly InTouchCX (14,000 sq.m. of take-up), Concentrix (14,000 sq.m.), and Teleperformance (17,260 sq.m.).

Year on year, demand was also 17.21% weaker than the 265,000 sq.m. take-up recorded in the second quarter of 2024, shortly before the ban on Philippine Offshore Gaming Operators (POGOs).

Since the POGO ban last year, about 197,400 sq.m. of office space has been vacated, bringing the total vacated space in Metro Manila to 995,600 sq.m. as of the second quarter.

When asked if office vacancies in Metro Manila could reach one million sq.m. this year, Espinosa anticipated that they would, but suggested the additional vacated spaces each quarter could decrease.

He also expressed hope that the growth of the IT-BPM sector would offset any POGO closures that might occur quarter-on-quarter.

Espinosa further noted that office developers have been managing their inventory, adding about 250,000 sq.m. to 300,000 sq.m. of new office space annually.

He explained that developers are hesitant to flood the market with too much supply given the current high vacancy situation, as the market might not be able to catch up and lease it.

Ultimately, most developers are waiting for the vacancy rate to drop before they resume aggressive construction, he concluded.

At present, Metro Manila has 1.84 million sq.m. of office supply, with 54% vacated and 46% consisting of new and unleased space, CBRE said.

Of the available supply, over 808,000 sq.m. is unleased, while 31,300 sq.m. is newly completed space.

Provincial Markets

Meanwhile, Cebu continues to lead the provincial office market, with a vacancy rate of 17.9% in the second quarter, down from 18.3% in the previous quarter.

CBRE also noted improved vacancies in other provincial submarkets: Iloilo (25.3% in the second quarter from 30.6% in the first quarter); Clark, Pampanga (31.7% from 32.2%); and Davao (11.2% from 11.9%).

The Bacolod office market, however, saw vacancy jump to 53.4% in the April-June period, following the recent completion of the 17,500-sq.m. SM North Block.

Industrial and Logistics Sector

The industrial and logistics sector saw gains in the second quarter, with vacancy improving to 6.7% from 9.6% in the first three months. This covers the submarkets of Cavite, Laguna, and Batangas (Calaba), CBRE said.

As of end-June, the Calaba industrial market had 435,800 sq.m. of total available warehouse space. Of this, 253,000 sq.m. is in Laguna, 101,600 sq.m. in Cavite, and 81,100 sq.m. in Batangas.

For the remainder of the year, the Calaba industrial submarkets have about 46,800 sq.m. of upcoming supply and 5 million sq.m. of total available land.