The Philippine office space market reached an unprecedented vacancy rate of 19.8% in 2024, driven primarily by the mass exit of Philippine offshore gaming operators (Pogos), according to the latest report from Colliers Philippines. The trend is expected to persist, with vacancies projected to hit 22% this year due to an influx of new office spaces.
Despite a “substantial drop” in new office supply in the fourth quarter of 2023, Metro Manila still recorded an increase in vacant office space, up from 19.3% in the previous year.
From September to December alone, approximately 334,000 square meters (sq m) of office space were vacated—a 73% jump from the 193,000 sq m recorded in the prior quarter.
Net absorption—an indicator of demand—fell by 20% to 185,100 sq m, marking its first decline since 2021. Meanwhile, new supply plummeted 70% to just 6,000 sq m, underscoring the challenging market conditions for office landlords.
Colliers expects the situation to worsen in 2024, with an estimated 655,880 sq m of additional office space set to enter the market. With a high vacancy rate and declining demand, landlords are pressured to adapt to the shifting office landscape.
Opportunities for tenants and developers
Despite these challenges, Colliers Philippines’s director for office services, Kevin Jara, emphasized that the current surplus of office spaces presents a golden opportunity for tenants to negotiate better lease terms and rental rates.
“The abundance of office space presents a prime opportunity for tenants to secure good deals in the market,” Jara noted.
For developers, the situation calls for strategic enhancements to make their properties more appealing. Colliers recommends the following strategies to remain competitive:
- Refurbishment of older spaces – Upgrading outdated office spaces can help attract new tenants.
- Conversion of vacated spaces into showrooms reduces demolition costs while allowing potential tenants to visualize possible layouts.
- Customization and financial incentives – Tenant improvement allowances can help companies customize spaces without heavy upfront investment.
- Fitted office spaces – Move-in-ready offices can be an attractive option for businesses with limited capital expenditure.
A tenant’s market
With the office sector now favoring tenants, companies are advised to reassess their workspace needs and negotiate flexible lease agreements to maximize value.
“For companies with limited capital expenditure, fitted office spaces provide a cost-effective solution, eliminating the need for expensive fit-outs,” Colliers added.
As the Philippine office market continues to navigate shifting demand patterns and increasing vacancies, landlords and tenants must adapt to stay ahead in this evolving real estate landscape.