Metro office vacancy rate tipped to dip to 18.8% in ʼ24

BPO industry picking up more space as firms add more seats

The office vacancy rate in Metro Manila is expected to ease to 18.8 percent this year from 19.4 percent in 2023, with the business process outsourcing (BPO) industry continuing to drive the uptake.

According to real estate advisory firm CBRE, the office market vacancy rate in Metro Manila should further decline to 5.4 percent by 2027 as the property sector continues to regain ground lost due to the COVID-19 pandemic and buyers mop up excess inventory.

Leading industry recovery is the increase in the BPO sector’s full-time employees by 8.5 percent by 2027.

The BPO sector is estimated to account for 65 percent of the market.

Vacated space

The CBRE said the optimistic projection was also based on the assumption that annual vacated space will not exceed 200,000 square meters (sq m).

“Every quarter, you see some companies are still adjusting their space take-up because they’re dealing with the realities of how their employees are reacting to certain policies that they institute,” CBRE’s country head for advisory and asset services Jie Espinosa said.

According to CBRE, there are 1.72 million sq m of office space available in Metro Manila.

Available space

Most of the available office space is located in the Bay area, where 362,500 sq m—or about 21 percent of the total—are currently available.

Meanwhile, Alabang had the least available space at 233,400 sq m or 13.6 percent of the total, followed by Fort Bonifacio with 243,900 sq m (14.2 percent), Ortigas with 259,500 sq m (15.1 percent), Makati with 290,200 sq m (16.9 percent) and Quezon City with 330,7000 sq m (19.2 percent).

Source: Inquirer

Vacancy Rate for Offices Highest in 12 years

The shift to work-from-home setup and the exit of offshore gaming companies have worsened the office space vacancy rate in Metro Manila to a new high since the global financial crisis, a global property services firm said.

In a report, US-based Cushman & Wakefield said the vacancy rate in prime and grade A office spaces in Metro Manila went up to 10.7 percent in the first quarter, the highest and only double-digit rate since the 14.5 percent in the aftermath of the global financial crisis in 2009.

The vacancy rate widened by a sizable 710 basis points (bps) or 7.1 percentage points when compared to the same period last year, and by 290 bps when placed against the previous quarter.

Cushman & Wakefield attributed the wipeout in occupancy to the growing trend in private firms to adapt flexible work arrangements.

Also, Philippine offshore gaming operators (POGOs) – a major tenant – also headed toward the exit last year as they wait for legislators to pass a more concrete measure to legalize their operations here.

Further, the construction of new office spaces were completed in the first quarter, and this added to the old stock left behind by firms and POGOs. According to Cushman & Wakefield, about two-thirds of the 203,000 square meters of new supply remain available in the market.

As vacancies jump to a record high, office space leasing in Metro Manila flips to favor tenants over property owners in terms of prices.

In the first quarter, the cost of renting in the nation’s capital slipped by 1.2 percent to P1,070 per sqm a month from last year, and also slid by 0.4 percent from P1,074 in the previous quarter.

On the other hand, offers in most prime and grade A office spaces in Makati City and Bonifacio Global City sustained their 2020 levels, although owners and developers are now beginning to stretch their payment terms in rent negotiations.

Cushman & Wakefield projects supply to overwhelm demand for the whole year, as regulations hindering the full resumption of work will suppress take-up of office spaces.

Tetet Castro, director and head of tenant advisory group at Cushman & Wakefield, said changes in work options would slow the recovery of the office space industry.

Also, the uncertainty on when workers can report to office may force developers to postpone new and expansion projects until such time local outbreaks are contained.

“We are seeing restructuring and changes in real estate strategies of multinational companies materializing this year largely due to the continued implementation of remote work arrangement as it remains unclear when we can safely return to the office, as manifested by the recent surge in new cases,” Castro said.

Meanwhile, Cushman & Wakefield is banking on the implementation of the Corporate Recovery and Tax Incentives for Enterprises, or CREATE Act, to rejuvenate business confidence with the law’s provision to bring down corporate income tax to 25 percent.

Source: Philstar