NCR office vacancies seen falling as new construction tapers off

THE Metro Manila office vacancy rate is expected to decline gradually starting in 2025, after having remained steady in recent years, Leechiu Property Consultants, Inc. (LPC) said.

“Starting 2025, the pipeline of buildings will come down. It should help get the market to breathe a bit more and hopefully, vacancy levels will shift downwards gradually,” Mikko Barranda, Commercial Leasing director at Leechiu Property said during an Oct. 8 briefing.

He cited a trend of delaying building launches, which will eventually bring vacancies to single-digit levels by 2028.

“About 66,000 square meters (sq.m.) of newly completed buildings were added to the market, with 345,000 sq.m. expected in the pipeline by the fourth quarter of 2024,” LPC said.

The company said the vacancy rate was flat at 17% in the third quarter, with available supply at 18.4 million sq.m. and 3.1 million sq.m. lying vacant.

POGO DEPARTURE
About 50,000 sq.m. of office space was vacated in the third quarter of 2024 by Philippine Offshore Gaming Operators (POGO), Mr. Barranda said.

In July, President Ferdinand R. Marcos, Jr. ordered the winding down of POGO operations by the end of 2024.

The industry started to downsize in the third quarter, he said.

“Once the exit happens, we’ll see that district like Makati, Bonifacio with their very low exposure to the industry won’t be affected as much,” he said.

Mr. Barranda added that these central business districts (CBDs) will have to make only limited adjustments compared to the so-called “Bay Area” around Manila Bay, where POGOs have a larger footprint.

He estimated that legal POGOs currently occupy 500,000 sq.m. of office space, well off their peak of 45% of the office market in 2020.

Overall, leasing demand declined 16% year on year to 215,000 sq.m. in the third quarter, he said.

POGOs accounted for only 8% of demand in 2024.

In the year to date, office transactions amounted to 900,000 sq.m., up 11%, led by the Information Technology and Business Process Management industry and traditional locators.

“Majority of recorded transactions were due to tenants relocating to newer buildings,” Leechiu said, in contrast to a year earlier when more tenants were downsizing or canceling their leases. — Aubrey Rose A. Inosante