According to the latest real estate market monitoring report released by CBRE Group, a real estate services and investment company, the office space vacancy rate in the Metro Manila area has risen to 19.9% in 2024, reaching a high point in recent years.
This figure is equivalent to about 1.8 million square meters of office space being vacant, showing that the office market in the region is facing ongoing pressure.
The report points out that the vacancy of office space is not only due to the Philippine government's ban on offshore gaming (POGO), but also closely related to the adjustments and relocations in the Information Technology-Business Process Management (IT-BPM) industry.
Data shows that 32% of the vacant space comes from IT-BPM companies reducing their scale or relocating, while the offshore gaming industry accounts for 31% of the share.
Jay E. Espinosa, head of CBRE Philippines, explained, "Many vacancies do not come solely from the POGO industry, but also include adjustments in the IT-BPM sector. They have not completely exited the market, but indeed have reduced their business scale or relocated to other areas in some regions."
He added that changes in client demands are an important reason for IT-BPM companies to reorganize, and some companies choose smaller, more efficient office spaces.
Facing the growing vacancy rate, office space developers are exploring response strategies. NEO, one of the largest office building developers in Taguig City, stated that the industry slowdown has prompted them to change strategies, such as building more cohesive communities among tenants to attract employees to return to office work.
Raymond Rufino, CEO of NEO, admitted, "The current office market is indeed facing severe challenges, whether from actual data or market sentiment, this is not an exciting time."
Carlos Rufino, co-managing director of NEO, also stated, "Our main competitor is actually the work-from-home model. The industry needs more innovation to attract businesses to revalue the office."
Despite the current market uncertainty, industry experts believe that the future recovery of the office space market will depend on the promotion of flexible office models and more innovative solutions that adapt to business needs. Meanwhile, office space developers may need to re-examine traditional leasing models and offer more added value to attract tenants.
With the gradual improvement of macroeconomic conditions and the completion of business adjustments, the office building market in Metro Manila may welcome a new round of opportunities.
He mentioned that they now organize various activities for tenants and their families to attract people to still go to the office and recognize the importance of being with friends and colleagues.
Although the vacancy rate is high, the rent has not significantly decreased. Espinosa stated that some building management companies choose to offer incentives to tenants, such as rent-free periods or other benefits.
However, CBRE Group remains optimistic that by the end of this year, the 19.9% vacancy rate will come down. One of the reasons for last year's slowdown was the US election, as many American companies delayed their decision-making process, affecting transactions of American IT companies in our country. But Espinosa mentioned that with the elections over, many American companies are now starting to inquire or discuss renting office space in the Philippines.
When asked if the vacant space will drop to single digits before 2027 as he predicted in previous events, Espinosa answered that due to many external factors, it has now become more difficult to assess the situation. He is also watching how Donald Trump's administration's policies will affect American companies in the Philippines.
