According to the latest "Real Estate Market Monitoring Report" released by the real estate services company CBRE, the vacancy rate of office buildings in Manila will climb to 19.9% in 2024, equivalent to nearly 1.8 million square meters of available office space. Among them, 51% are vacated units, and 49% are still unrented, showing that market demand continues to be weak.
CBRE Philippines President Jie Espinosa pointed out that although the Philippine government's ban on offshore BC operators (POGO) has impacted the market, it is not the only factor for the rise in vacancy rates.
Information Technology and Business Process Management (IT-BPM) enterprises are also an important reason for the increase in vacancy rates due to business adjustments and relocations. Data shows that the IT-BPM industry contributed 32% of the vacated office space, while the withdrawal of POGO accounted for 31%.
Espinosa said: "A large amount of vacant space does not all come from POGO enterprises; the IT-BPM industry is also adjusting its operations. Some companies change office locations due to client demands, while others choose to streamline their office scale."
Meanwhile, NEO, a major office building developer in Taguig City, also admits that the growth of the traditional office building market has slowed down due to the remote working trend, and companies are adopting strategies to attract employees back to physical offices. NEO CEO Raymond Rufino acknowledges: "The current market is indeed facing challenges and needs more flexible strategies." His co-director Carlo Rufino added that remote working remains a major alternative option for companies leasing physical office spaces.
In the face of weak demand, some owners choose to offer rental incentives, such as rent-free periods and additional services, rather than directly reducing rents, to attract companies to lease office space.
Despite the high vacancy rate, CBRE remains optimistic about the market recovery. Espinosa believes that during the US election period, the slowdown in decision-making by US-funded enterprises affected the Philippine leasing market, but the situation is improving as the election ends. He said: "We see the demand in the US healthcare industry growing, and at the same time, banks, financial services, and insurance companies (BFSI) are also considering the Philippines as a destination for shared services or outsourcing operations."
However, Espinosa also admits that there are still uncertainties in the market, especially as policy adjustments by the new US administration may affect the investment plans of US-funded enterprises in the Philippines.
Therefore, although the target of reducing the vacancy rate to single digits by 2027 is still in place, whether it can be achieved still depends on the global economic situation and corporate decisions.
