Property consultant Cushman & Wakefield said a complete ban on Philippine offshore gaming operations (POGO) will add further pressure on office rents.

This is made more significant by the “elevated office market vacancy rate,” said Claro Cordero, Cushman & Wakefield head of research.

The company said overall vacancy in prime and Grade A offices in Metro Manila stood at 15.2 percent as of the end of June.

As of end-June, an additional 113,000 square meters (sq.m.) of prime and Grade A developments had been added to the supply, bringing the total stock to 9.65 million sq.m., the property consultant said.

“This, in turn, results in a quarterly net absorption figure of roughly 203,000 sq.m.,” it said, noting that total office stock is expected to increase by another 38,000 sq.m. by the end of 2024.

“Vacancy rates will remain elevated in the medium term due to the large volume of new office space and the effects of the deferred expansion decisions of IT-BPM (information technology-business process management) companies awaiting the finalization of …the CREATE MORE (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy) bill,” Cushman & Wakefield said in a statement.

It said average asking rent for Prime Grade A spaces was steady at P1,012 per sq.m. per month, with property owners in the major central business districts keeping their headline rate steady in the near- to medium-term, while those in the fringe areas are most likely to post lowered headline rents as high building and market vacancies persist.

Tetet Castro, Cushman & Wakefield head of tenant advisory

group, said Metro Manila’s commercial real estate market remains in the recovery phase.

“Overall vacancy rates will remain elevated in the medium term due to the huge volume of upcoming developments, delayed passing of amendments to CREATE, and the pronounced total ban on POGOs from the country. Nonetheless, headline rents of developments, particularly in the major CBDs (central business districts), will remain unchanged,” Castro said.

According to Cushman & Wakefield, IT-BPM companies are now showing heightened demand for office spaces in Tier 2 locations to access the talent pool in the provincial areas and lower capital expenditures (capex) and operating expenses.

“While new entrants are still looking at Metro Manila to establish their first office in the country, existing IT-BPM occupiers now consider Tier 2 locations as primary areas to expand their operations,” it said.

Meanwhile, serviced offices continue as an alternative to traditional office spaces, providing companies the flexibility to adjust their space requirement to suit their current headcount as well as their future growth projections, Cushman & Wakefield said.

“Serviced offices having no capex makes it a viable option for companies, particularly new entrants to the country,” it said.