The Metro Manila office market faced significant challenges in 2024, posting its first negative net take-up since 2021. However, opportunities remain for both landlords and tenants to capitalize on market conditions.

Key Highlights:

✅ High Vacancy Rates

• Vacancy reached a record 19.8% in 2024, expected to rise to 22.0% in 2025 due to new supply and continued lease non-renewals.
• The exit of Philippine Offshore Gaming Operators (POGOs) and the expiration of pre-pandemic leases contributed to the increase.

✅ Declining New Supply

• New office supply in Metro Manila dropped by 70% year-on-year due to construction delays and lower pre-leasing activity.
• In Q4 2024, only 6,000 sqm of new office space was completed, with a projected increase to 655,800 sqm in 2025.

✅ Market Shifts & Tenant Behavior

• Provincial office markets like Cebu, Davao, and Batangas are gaining traction, attracting more businesses due to competitive rental rates and infrastructure improvements.
• Traditional firms accounted for 59% of total office space transactions, with outsourcing companies making up 33%.

✅ Stable Lease Rates

• Average lease rates in Metro Manila declined by 0.3% in 2024, but primary business districts (CBDs) such as Makati, Fort Bonifacio, and Ortigas showed signs of rental recovery.
• Rents are expected to remain flat in 2025, with landlords offering more incentives to attract tenants.

Recommendations for Landlords:

1. Enhance Office Spaces
   • Offer tenant improvement allowances (TIA) for fit-outs.
   • Reinstate vacated spaces to meet modern standards.
   • Create showroom spaces for prospective tenants.
   • Upgrade aging properties with energy-efficient systems, better ventilation, and modernized common areas.
2. Be Flexible with Lease Terms
   • Provide rent-free periods and competitive rates.
   • Offer plug-and-play office setups to attract cost-conscious tenants.
3. Target Expanding Businesses
   • Focus on high-demand industries like outsourcing and technology.
   • Tap into provincial markets where demand remains resilient.

Opportunities for Tenants:

• Negotiate better lease terms – The current tenant-favorable market offers a chance to secure lower rents and additional incentives.
• Relocate to higher-quality spaces – Many landlords are offering competitive pricing for prime office locations.
• Explore provincial markets – Emerging office hubs in Cebu, Pampanga, and Davao provide cost-effective alternatives with modern facilities.

Outlook for 2025

While the Metro Manila office market faces short-term challenges, businesses can leverage the current market conditions to secure better deals. Meanwhile, landlords must innovate and offer flexible leasing options to stay competitive. With the right strategies, the office market can rebound, driven by infrastructure developments and evolving tenant needs.

Source: Colliers | Colliers Quarterly | Property Market Report – Office | Q4 2024 | Philippines