Metro Manila office vacancy seen widening

The size of vacated office spaces in Metro Manila expanded in 2024 due to the expiration of prepandemic leases as well as the exodus of Philippine Offshore Gaming Operators (POGO), a property consultancy firm said in a report by BusinessMirror.

Colliers Philippines’ recent report indicated that 531,000 square meters (sqm) of office space were vacated in 2024, marking a 36-percent increase year-on-year from the 581,000 sqm recorded in 2023.

Despite 752,000 sqm in transactions, including pre-leasing in upcoming developments, net take-up remained negative at -45,000 sqm, reversing the 280,000-sqm gain seen the previous year.

Metro Manila’s office vacancy rate reached 19.8 percent by the end of 2024. Among major submarkets, Makati Central Business District (CBD) remained the most resilient, with a vacancy rate of 8.3 percent.

Meanwhile, Fort Bonifacio and Ortigas Center saw higher vacancies at 17.2 percent and 12.8 percent, respectively.

In contrast, Quezon City closed 2024 with a 22.8 percent vacancy rate, while the Bay Area (34.9 percent), Makati Fringe (35.9 percent) and Ortigas Fringe (24.2 percent) continued to experience high vacancy levels due to a mix of vacated spaces and subdued demand.

Areas like Alabang (32.5 percent) and other emerging locations (38.3 percent) also struggled with low tenant absorption.

Despite these rising vacancies, projections for 2025 suggest a modest addition of new office space across Metro Manila, with 656,000 sqm expected to be completed during the year.

The bulk of new supply will come from Quezon City, which is forecast to add 202,000 sqm, the largest increase among all submarkets. Ortigas Center is expected to add 55,000 sqm, while Bay Area, Makati Fringe and Ortigas Fringe will see an additional 59,000 sqm, 69,000 sqm, and 48,000 sqm, respectively.

More stable office markets like Makati CBD, Fort Bonifacio and Alabang will introduce 33,000 sqm, 38,000 sqm and 38,000 sqm of new space, respectively.

In 2024, traditional industries such as government, banking and logistics led the office leasing activity. The BPO sector expanded, increasing its office footprint to 267,000 sqm from 194,000 sqm in 2023. Conversely, POGO demand dropped significantly, reaching only 167,000 sqm in 2023, with little to no contribution in 2024.

Colliers advised landlords to consider offering tenant improvement allowances to attract tenants and suggested refurbishing or reinstating office spaces to improve their marketability.

For spaces in bare shell condition, Colliers recommended creating showrooms to display potential setups, especially if the cost of demolition or reinstatement is prohibitive. For older properties, the firm suggested considering redevelopment as a way to maximize their value.