PH office vacancy zoomed to record high 19.8% in 2024
Philippine office space vacancy rose to an all-time high in 2024 due mainly to the exit of Philippine offshore gaming operators (Pogos), with this level likely climbing higher this year on the back of upcoming inventory.
Although there was a “substantial drop” in new supply in the fourth quarter of last year, office vacancy in Metro Manila inched up to a record 19.8 percent from 19.3 percent in 2023, real estate investment management firm Colliers Philippines said in its latest property market report.
In the September to December period alone, around 334,000 square meters (sq m) of office space were vacated, or a 73-percent surge from 193,000 sq m the previous quarter.
Net absorption declined for the first time in 2021 as it went down by 20 percent to 185,100 sq m. At the same time, new supply dropped by 70 percent to 6,000 sq m.
This reflects a still challenging environment for the office industry, with Colliers expecting this to increase further to 22 percent this year on the back of an additional 655,880 sq m of new space coming up.
Value for money
Kevin Jara, Colliers director for office services, stressed that this was an opportunity for developers to remain competitive and “enhance the value of their spaces to meet evolving workplace needs.”
“The abundance of office space presents a prime opportunity for tenants to secure good deals in the market,” Jara said in their report.
What developers can do, according to Colliers, is refurbish aging and vacated spaces and make these more attractive to prospective tenants.
Reinstated spaces can also be transformed into showrooms to cut demolition costs and help potential tenants visualize layouts, thus increasing attractiveness.
Customization
Developers can likewise offer tenant improvement allowance, or financial assistance meant to support renovations and customization.
“With a substantial volume of new office supply entering the market, landlords with older properties must take proactive measures to remain competitive,” Colliers said.
At the same time, occupiers need to take advantage of the current “tenant-favorable market” and maximize value by assessing their office needs and negotiating more favorable lease terms.
“For companies with limited capital expenditure, fitted office spaces provide a cost-effective solution, eliminating the need for expensive fit-outs,” Colliers added.
