Hybrid work, new supply to drive 22% office vacancy rate this year — JLL

HYBRID working arrangements and new office spaces are expected to contribute to a 22% vacancy rate by the end of the year, according to JLL Philippines.

“By end 2024, what we forecast for vacancy levels is to reach around 22% and the reason for that is to expect an additional 500,000 square meters (sq.m.) of all stock on demand,” JLL Philippines Head of Research and Strategic Consulting Jan-Loven C. de los Reyes said during a press briefing on Thursday last week.

“That would apply supply pressure on the market, considering that we have heavy vacancy levels that are in the double digits across cities,” he added.

JLL said the first quarter vacancy level eased to 19.9% from 20.3% in the fourth quarter of 2024.

However, this vacancy level is still higher than 17.8% in 2023.

According to Mr. De los Reyes, overall, this was due to the reduction in new supply, coupled with a good take-up rate of around 75%. Manila had the highest vacancy rate at 38.1%, followed by Parañaque at 50.4%, and the lowest in Bonifacio Global City at 9.1%.

He also noted a “double whammy” that contributes to the high vacancy level, citing the exit of the Philippine Offshore Gaming Operators and the emergence of hybrid work arrangements.

JLL projected approximately 582,234 sq.m. of stock for the end of 2024, followed by 456,219 sq.m. in 2025, and 227,749 sq.m. in 2026. Additionally, there will be 43,066 sq.m. for both 2027 and 2028.

Regarding take-up, JLL noted a rise in leasing volumes to 149,172 sq.m. in the first quarter from 81,785 sq.m., attributed to the spillover of deals from the fourth quarter of 2023.

But year on year, this was slower and fell by 30% to 213,707 sq.m. The cities of Taguig and Makati led the transaction activities.

Per sector, the share of business process outsourcing (BPO) in total leasing activity stands at 68.9%, while corporate occupiers account for 31.1%.

Mr. De los Reyes said leasing volumes are anticipated to remain moderate over the next quarters but are still significantly below the levels seen during the pandemic.

He noted that the easing conditions are due to office demand being tempered by hybrid working.

“Select BPO companies have been releasing spaces but have not taken out additional spaces by improving their headcount,” he said. “There are also going to be companies who are taking up space, keen to have employees return to the office, and this may come from the financial services segment.”

For the first quarter, JLL said the released office space rose to 97,365 sq.m.

The BPO sector pullout in Muntinlupa City amounted to 3,400 sq.m., while the corporate occupier pullout in Taguig City totaled 1,000 sq.m.

JLL also said that Metro Manila’s overall rents remained unchanged at P1,004 per sq.m. in the first quarter. — Aubrey Rose A. Inosante