Malaya Business Insight culled the analysis of leading property consultancy companies of the performance of the office real estate market in 2024, and the prospects in 2025.
While Santos Knight Frank, Colliers and Leechiu Property Consultants agree vacancy and takeup remain a challenge with the exit of the Philippine offshore gaming operations, they see a bright spot in the continued expansion and upgrade of traditional occupiers and the rightsizing of information technology -business process management companies.
The property consultancy companies also see occupiers’ preference to green spaces and sustainable buildings, a trend long predicted by developers.
Here are some of the highlights
Expansion continues
Property consultant Santos Knight Frank (SKF) expects the office segment of the property sector to continue to rebound amid the continued expansion of existing occupants.
Citing its recent occupier sentiment survey, The Collab, SKF said about 64 percent of companies see potential expansion in their office footprint in the next three to five years, with one in every three indicated choosing Metro Manila as their preferred location for growth.
“Overall, the commercial real estate sector has been thriving in 2024, fueled by outsourcing expansion and leasing activity. Despite limited supply in high-end and prime real estate, the sector continues to show stability and growth amid evolving market challenges,” the property consultant said.
Morgan McGilvray, SKF senior director of occupier strategy, said office supply currently stands at 8.8 million square meters (sq.m.), following the completion of 181,000 sq.m. additional supply on a year-to-date basis.
Another 420,000 sq.m. of space is expected to be completed between 2025 and 2029.
With the government’s decision to ban Philippine offshore gaming operation in the Philippines, vacancy in Metro Manila currently stands at 20.09 percent, SKF said.
McGilvray, however, noted vacancy swings of between 18 and 20 percent, depending on location.
Among Metro Manila’s prominent central business district areas, Taguig remains the preferred office location with a vacancy rate of 12.4 percent.
“When a market is 20 percent vacant, that is a tenants’ market, the tenants have the advantage,” he said.
Given the expect incoming supply, vacancy would stay within the 18 to 21 percent range moving forward, similar to the trend seen over the last two years, McGilvray added.
SKF, meanwhile, noted a “growing preference” for sustainable developments like green buildings by tenants even while commanding higher rates.
Additionally, green-certified buildings continue to see strong demand, with an average take-up of 87.27 percent compared to 82.39 percent from traditional office spaces, most notably in Makati and Bonifacio Global City, it said.
“Tenants increasingly recognize the benefits of reduced operational costs, improved employee well-being, and an enhanced corporate image,” the property consultant said. – Ruelle Castro
Vacancy at record
Colliers, in its 2025 outlook report, sees record high vacancy rate with the exodus of Philippine offshore gaming operations (POGO).
“In 2024, we project overall vacancy to rise to 20.5 percent, a record high,” said Colliers.
But it said not all central business districts (CBDs) are the same.
The consultancy firm said Makati, Fort Bonifacio and Ortigas CBDs are faring better than, say in the Bay Area, which has the largest concentration of POGOs.
Per submarket, Makati CBD will continue to record healthy occupancy rates where limited vacated spaces was reported, the report said.
“In our view, primary CBDs such as Fort Bonifacio, Ortigas CBD and Makati CBD are likely to recover faster compared to the Bay Area, Alabang and Makati fringe,” Colliers said.
In the poll, Makati CBD emerged as the preferred destination for relocation and expansion.
“Tenants should take advantage of available fitted office space especially those implementing flight to cost and flight-to-quality measures. We see more occupants including government agencies taking advantage of high-quality office spaces being offered at a discount,” Colliers said.
As it is, average lease rates in Metro Manila corrected by nearly 40 percent from 2020 to 2023.
“We are likely to see sustained office space demand in Pampanga, Cebu, Davao, Bacolod, Iloilo, and Davao. We are getting queries from large business process outsourcing firms planning to either open their first facility or expand in these locations,” Colliers added.
The company also sees a more pronounced take-up for green and sustainable office space across the country.
In the first 9 months of 2024, Colliers recorded 293,900 square meters (sq.m.) of office space transacted in green buildings with the following certifications or pre-certifications:
Leadership in Energy and Environmental Design. Or LEED; Excellence in Design for Greater Efficiencies or EDGE; WELL Building Standard and; Building for Ecologically Responsive Design Excellence or BERDE.
This is nearly double compared to the 151,900 sq. m. transacted a year ago.
“Given the heightened importance of sustainability in occupiers office requirements, landlords are encouraged to infuse green features into their portfolio,” Colliers said.
According to the report, major office developers are taking the lead in promoting sustainability in workspaces.
“We see a more pronounced promotion of healthy office space as developers and occupants work together to lure employees back to traditional office setup,” Colliers added.
Stabilizing by 2027
Leechiu Property Consultants (LPC) sees the office real estate market to stabilize by 2027, with vacancy rates returning to pre-pandemic levels of 7 percent by 2030.
In its yearend report, LPC said the Philippine office leasing sector is poised for long-term recovery, following steady demand growth since 2021.
“Although vacancies remain elevated at 18 percent, supply and demand trends indicate that the market is shifting toward equilibrium, with clearer signs of recovery expected by 2027,” said Mikko Barranda, director for commercial leasing at LPC.
In the report, LPC said the Philippine office leasing market recorded 1.1 million square meters (sq.m.) of transacted deals in 2024, reflecting a 4 percent year-on-year growth and marking the highest transaction volume since the pandemic.
This expansion comes despite challenges such as the ban on Philippine offshore gaming operations, high interest rates, and inflationary pressures, LPC said.
LPC said government relocations and expansions in the Bay Area accounted for a huge hunch 122,000 sq.m. of recorded transactions in 2024.
The traditional sector led the market with 492,000 sq.m, surpassing the Information technology-business process management industry. Although demand slowed in the latter half of 2024, the full-year total reached 1 million sq.m.
LPC said traditional office demand grew by 13 percent in 2024 compared to 2023. Following the POGO ban in July, no POGO-related office space demand was recorded in the year’s second half, highlighting a market shift toward more sustainable tenants.
The report said over 80 percent of all transactions came from the traditional sector, with deals primarily under 500 sq.m. IT-BPM companies leased spaces ranging from 1,000 to 5,000 sq.m, while government relocations in the Bay Area typically ranged from 2,000 to 5,000 sq.m.
LPC said transactions above 1,000 sq.m accounted for 75 percent of the market’s overall demand.
In terms of preferences, the report said IT-BPM firms, traditional tenants, and government offices favored Grade B buildings under 10 years old. Notably, 10 percent of IT-BPM deals over 1,000 sq.m. were driven by new market entrants, signaling continued interest in the Philippines.
Metro Manila recorded 881,000 sq.m. of total leasing demand, with the Bay Area as the top-performing district due to government relocations.
Outside Metro Manila, Cebu led with 113,000 sq.m, representing nearly half of provincial demand.
For 2025 transactions, LPC said live demand for office space reached 494,000 sq.m, with over half driven by third-party IT-BPM vendors.
The government seeks an additional 71,000 sqm for expansion, while companies primarily target Metro Manila, with Bonifacio Global City (BGC) as the preferred location.
Contractions rose by 65 percent due to the POGO exit, but IT-BPM firms largely relocated or consolidated instead ofdownsizing. Net demand fell 35 percent from last year due to these contractions but still totaled 1.4 million sqm.
LPC said vacancy rates remain at 18 percent nationwide, with the Bay Area affected by the POGO exit and Taguig seeing increased vacancies from newly completed buildings.
