The office market in Metro Manila showed mixed results in the third quarter of 2024, as new supply continued to come in despite the prevailing high vacancy and declining rents, according to the latest study by KMC Savills Research, a leading real estate brokerage and consultancy firm.
Some 132,000 square meters (sq. m.) of new office space were added to the market this year, a significant increase from the previous year.
Vacancy rate
With an additional 500,000 sq. m. of office space anticipated to enter the Metro Manila market by end of 2025, KMC Savills said the vacancy rate would remain above 20 percent.
Makati central business district continues to lead with the highest amount of vacant office space of 361,000 sq. m. available for lease.
Ortigas Center maintains a substantial office stock of 1.2 million sq. m., with 30 percent of that space currently available.
Even with steady take-up from the IT-BPM sector and periodic upticks in leasing activity from traditional occupiers, the lowering of rental rates due to the high vacancy rate may help alleviate the oversupply of new offices in the region,” KMC Savills said.
Construction delays resulted in the postponement of 32 percent of planned office completions. These delayed office projects could have contributed to the higher vacancy rates across Metro Manila.
IT-BPM contribution
The impact of POGO ban on specific districts has been minimal as the overall office market in Metro Manila remained resilient.
The IT-BPM and traditional offices support demand, contributing to a positive net take-up of 34,800 sq. m. in the third quarter, a substantial increase from the 3,900 sq. m. recorded during the same period last year.
Makati recorded a net take-up of 33,400 sq. m. of office space, while key districts such as Ortigas Center, Alabang CBD and Quezon City reported more modest net absorption, each below 5,000 sq. m.
Bonifacio Global City recorded a negative take-up of 7,800 sq. m. primarily due to space reductions by the IT-BPM sector as it transitions to hybrid work models, reducing the need for physical office space.
The Bay Area registered a negative net absorption of 4,800 sq. m., attributed to declining demand following the recent POGO ban.
Rental rates
Metro Manila saw a slight decline in rental rates in the third quarter of the year.
To boost occupancy, landlords lowered rates, resulting in a 0.8-percent decrease compared to the previous quarter. The average rental price dropped to P853.1 per sq. m. from P860.3 per sq. m
Makati CBD’s rental rates experienced a minor dip in the third 2024, registering at P 1,018.6 per sq. m. This downward trend is expected to persist as certain Ayala Avenue buildings face rental adjustments to account for their age.
