Metro Manila office vacancy seen dropping below 20%

Metro Manila’s office market is showing signs of recovery, with vacancy rates projected to fall below 20% by the end of 2025, according to a recent article from BusinessWorld citing data from CBRE Philippines.

Speaking at the firm's recent 2025 Market Monitor forum, CBRE Philippines Country Head Jie C. Espinosa expressed cautious optimism about the market’s recovery, noting that the bulk of POGO-related move-outs had already taken place, clearing the way for more stable demand from core sectors.

“We’re past the worst of the POGO fallout,” Espinosa said. “As long as the current level of demand holds steady, we expect vacancy rates to fall into the sub-20% range before the year closes.”

POGO departures had driven up vacancies in previous quarters, pushing Metro Manila’s office vacancy to 20.1% in Q1 2025 — its highest level in three years. Yet even as the gaming sector pulls back, IT-BPM firms, healthcare providers, and banking and finance companies have begun to fill the gap.

While office demand contracted by 7% year-on-year to 161,500 square meters in the first quarter, Espinosa emphasized that “quality over quantity” is shaping this recovery, as space take-up shifts to more resilient, long-term sectors.

Among submarkets, Makati logged the highest volume of vacated office space at over 226,000 sq.m., followed by the Bay Area and Quezon City. However, CBRE noted that interest from domestic and foreign occupiers remains strongest in central business districts, where Grade A and sustainable buildings are seeing growing preference.

Looking ahead, CBRE expects new office supply to average around 300,000 sq.m. annually through 2029, with 389,600 sq.m. slated for delivery in 2025 alone.

In contrast, the industrial and logistics sector has softened, with demand plummeting by more than 50% in Q1, driven by investor caution linked to global trade uncertainty. CALABA (Cavite, Laguna, Batangas) — the country’s key warehouse corridor — saw vacancy rates tick up slightly, as major manufacturing decisions were put on hold.

Still, CBRE analysts believe the Philippines can capitalize on ongoing global supply chain shifts, particularly with its favorable U.S. tariff treatment. However, aging infrastructure and outdated warehouse inventory remain critical barriers to fully seizing the opportunity.

“In the office sector, we’re seeing early signs of stability. But for both office and industrial, modernizing our stock and addressing regulatory bottlenecks will be essential to sustaining long-term growth,” Espinosa said.