Office space completions in Metro Manila fell below projections in 2024, says Colliers

THE Metro Manila office market saw a shortfall in new supply in 2024, with actual office space completions falling below earlier projections due to construction delays, reduced pre-leasing, and elevated vacancies, according to property consultancy firm Colliers Philippines.

“In 2024, we recorded 182,400 square meters (sq.m.) of new supply, down 70% year on year and lower compared to our previous projection of 295,700 sq.m. due to construction delays, muted pre-leasing and elevated vacancies in selected submarkets,” Colliers said in its latest Metro Manila Office Report.

Office vacancy reached 19.8% as of end-2024, driven by the exit of Philippine offshore gaming operators and the non-renewal of leases. Colliers projects vacancy to increase in 2025 due to carryovers.

The Metro Manila office market also recorded its first negative take-up since 2021, with net absorption contracting by 45,100 sq.m. Net take-up is projected to reach 150,000 sq.m. in 2025 and 300,000 sq.m. through 2029, according to Colliers.

Office vacancy is expected to reach 22% this year due to the high level of upcoming supply, it added.

Colliers also expects the delivery of 655,800 sq.m. of new office space this year, up from its earlier forecast of 615,100 sq.m.

From 2025 through 2027, it projects an annual delivery of 380,600 sq.m. of new office space, with the Makati Fringe, Quezon City and Bay Area accounting for more than half of the new supply.

Metro Manila office transactions also declined by 9% to 751,000 sq.m. in 2024 from 827,700 sq.m. a year ago.

In the fourth quarter alone, office deals dropped by an annual 57% to 141,800 sq.m. due to the impacts of the US elections.

Traditional firms accounted for 59% of total transactions, followed by third-party outsourcing (33%) and shared service firms (8%).

Nearly two-thirds of total transactions in Metro Manila were attributed to the Bay Area, Quezon City, and the Fort Bonifacio central business district (CBD).

About 49% of transactions were expansions, Colliers said, offsetting the negative take-up recorded in 2024.

Meanwhile, the provincial office market stood resilient, signaling a shift in occupier demand outside the capital region.

Outside Metro Manila, office deals rose by 6% in 2024 to 221,600 sq.m., with Cebu emerging as the top location for expansions and relocations.

Deals are also now more dispersed, according to Colliers, citing the growing office markets in Davao, Bohol, and Batangas.

Average lease rates in Metro Manila dropped by 0.3%, it also said. Overall, Metro Manila rates will remain flat in 2025, with primary CBDs having sustained recovery.

Sustainable office spaces are likely to further take over the Metro Manila market, Colliers said. Between 2025 and 2027, it projects 59% of new supply to have green certifications.

RECOMMENDATIONSTo spur demand, occupiers are urged to capitalize on current market conditions and secure favorable lease conditions.

“Given the wide range of office options, Colliers encourages occupiers to consider a flight-to-value exercise by relocating to higher-quality spaces at lower rental costs,” it said.

For their part, landlords with older properties must offer flexible terms, such as base rent and rent-free fit-out periods to tenants, Colliers said.

They may also consider offering tenant improvement allowances, reinstating vacated spaces, providing showrooms of reinstated spaces, and refurbishing aging properties, it added. — Beatriz Marie D. Cruz