October 29, 2024 – The Metro Manila office market is grappling with significant shifts as the Philippine Offshore Gaming Operators (POGO) ban continues to impact demand. According to the latest report by Colliers, the third quarter of 2024 marked the first negative net office take-up since 2021, with space surrenders outpacing demand.
Vacancy rates in Metro Manila rose to 18.5% in Q3 2024, up from 18.3% in the previous quarter, as vacated spaces, particularly from POGO tenants and non-renewal of pre-pandemic leases, strained the market. Colliers projects vacancy levels to reach 20.5% by the end of 2024, driven by additional supply and further space surrenders.1
Despite the challenges in Metro Manila, provincial markets have shown resilience. Outsourcing firms remain aggressive in expanding their footprint in areas outside the capital, signaling a shift in office space demand.
Impact of Regulatory Developments
Colliers highlighted the potential influence of regulatory changes, such as the CREATE MORE bill and BEPS 2.0, on the office sector. These measures, including a proposed 50% cap on work-from-home setups and a global minimum tax rate of 15% for multinational enterprises, may drive shifts in business models for outsourcing and shared services firms.
Limited New Supply and Declining Rents
Only 9,500 square meters of new office supply were completed in Q3 2024, a significant drop attributed to construction delays and muted pre-leasing activity. Colliers predicts a 52% year-on-year decline in new supply by the end of the year.
Rental rates have also been affected, with average rents decreasing by 0.6% quarter-on-quarter in Metro Manila. While primary Central Business Districts (CBDs) such as Makati, Fort Bonifacio, and Ortigas show signs of recovery, secondary markets like the Bay Area are expected to face continued pressure.
Recommendations for Stakeholders
Colliers urged developers to address key employee concerns, such as long commute times, by exploring affordable housing options near office spaces. The report emphasized the need for landlords to incentivize tenants to return to the office by offering solutions that enhance work-life balance1.
The Metro Manila office market’s evolving dynamics underscore the need for flexibility and innovation among landlords and tenants. While challenges persist, the growth in provincial markets and regulatory reforms present opportunities for the industry to adapt and thrive.
Source: Colliers Quarterly | Property Market Report – Office | Q3 2024 | Philippines