Capital’s office vacancy rate seen to drop to 14% by 2028

THE vacancy rate of office spaces in Metro Manila is expected to decrease to 14% by 2028 due to projected demand growth, real estate consulting firm Colliers said on Wednesday.

“We see vacancy rates to gradually decrease to 14% by 2028,” Colliers Associate Director for Office Services Kevin Jara said during a briefing.

This is attributed to the “gradual growth of demand based on projections,” he said, adding that it includes demand from Philippine offshore gaming operators (POGOs).

For 2023, the office vacancy rate increased by 19.3% to 2.7 million square meters (sq.m.) as of the end of the year due to the delivery of new office buildings and surrenders from nonrenewals and preterminations.

“We’ve had a stronger transaction activity compared to 2022 and in terms of net-office demand. Due to this, we’ve actually averted our original vacancy forecast of 20%,” Mr. Jara said.

“In the next five years, it is our hope that the trend continues, and we continually avoid that 20% mark,” he said.

The vacancy rate recorded as of 2023 was higher than the 18.8% posted in 2022.

Colliers said in a report that net take-up in 2023 reached 279,800 sq.m., more than double the amount recorded in 2022, as transactions continued to outpace lease surrenders.

Mr. Jara said that Colliers expects the demand to reach 336,000 sq.m. by the end of 2024.

“In 2023, we achieved 828,000 square meters of office space transaction, culminating three-year momentum of increase in office space transactions volume in the market,” he said.

In terms of transaction profile, traditional offices comprised the majority of office space deals, accounting for 46% of the total, including government agencies, telecommunication companies, insurance firms, and flexible workspace operators, according to the property consultancy firm.

This was followed by third-party outsourcing, which constituted 34%, comprising shared services and multinational shared service and captive firms. POGOs reportedly accounted for 20%.

“With the increasing demand forecast that we have for this year and the start of tapering of office supply by Manila’s office developers, we expect rents to marginally increase by 2.5% by yearend,” Mr. Jara said. — Sheldeen Joy Talavera