Metro Manila office vacancy hits 19.9%, IT-BPM sector main driver: CBRE
MANILA, PHILIPPINES — Metro Manila‘s office space market is experiencing a significant shift, with vacancy rates reaching 19.9% in 2024, according to CBRE’s Real Estate Market Monitor.
This translates to nearly 1.8 million square meters (sq.m.) of available office space, with 51% attributed to vacated spaces and 49% remaining unleased.
IT-BPM sector, not POGO ban, drives vacancies
Contrary to popular belief, the ban on Philippine Offshore Gaming Operations (POGO) is not the primary cause of increased vacancies. The Information Technology and Business Process Management (IT-BPM) sector accounts for 32% of vacated spaces, while POGO-related vacancies come in second at 31%.
Jie Espinosa, CBRE Philippines Country Head, explained, “Most of the vacated spaces were not necessarily just from the POGO sector but from the IT-BPM sector. They’re not leaving. They’re simply just downsizing in certain locations.”
Factors contributing to office space vacancies
CBRE’s report identified three main factors driving the increase in office vacancy rates in Metro Manila. This includes:
- IT-BPM sector relocations: Many IT-BPM companies are moving to new locations or downsizing their office spaces. This shift is often driven by client preferences and the need for more cost-effective solutions.
- Work-from-home trend: The work-from-home trend has become a significant competitor to traditional office spaces. Carlo Rufino, Co-Managing Director of office building developer NEO, emphasized this challenge for the office market.
- New office supply: The market is expecting an additional 528,300 square meters of new office developments in 2024. This influx of new space contributes to the overall vacancy rate.
Office sector challenges and strategies
NEO CEO Raymond Rufino acknowledged the significant challenges currently facing the office sector. He stated, “Broadly office is really having a [difficult] time. Whether it’s perception, whether it’s reality, I think all of us in the office sector, it’s not the most exciting time for some of us.”
To address these challenges, some building management companies are implementing strategies such as:
- Offering incentives: Many are providing incentives, including rent-free periods and other benefits, to attract tenants.
- Encouraging office attendance: Companies are organizing activities for tenants and their families to promote a return to the office environment.
Market outlook and emerging opportunities
Despite the high vacancy rate, CBRE remains hopeful about the future of the office market:
- Potential vacancy reduction: The current 19.9% vacancy rate may decrease by the end of the year.
- Growing interest from various sectors: Jie Espinosa noted a surge in inquiries from sectors such as U.S. healthcare, banking, financial services, and insurance.
- Flight-to-quality trend: Tenants are likely to seek out high-quality office spaces at lower prices in prime locations.
“We’ve really seen strong inquiries and demand coming from the U.S. healthcare sector… We also saw banking, financial services, and insurance companies sending out their shared services requirements, their outsourcing requirements here in the Philippines,” Espinosa concluded.
