Office vacancies in Metro Manila hit 20-yr high

Vacancies in Metro Manila’s prime and grade A office market hit a 20-year high as of the end of the third quarter this year, with rental rates declining for the fourth straight quarter.

A report from global commercial real estate services firm Cushman and Wakefield puts the average office vacancy rate at 18.2 percent, the highest since the second quarter of 2004.

“The Metro Manila office market is exhibiting a slower-than-expected recovery in Q3 2024,” Cushman & Wakefield director and head of tenant advisory group Tetet Castro said in a statement.

“Overall vacancy rates have steadily increased and average headline rents have marginally declined again this quarter, making the market more favorable for tenants,” added the company official.

READ: JLL: Metro Manila office vacancies rose to 19.9% in Q1

An additional 114,000 square meters of office space was added to the market during the quarter, as well as a significant volume of office spaces being returned due to major corporate occupiers rationalizing their office needs, the report said.

The firm’s medium-term projection sees vacancies remain high due to the ban on Philippine Offshore Gaming Operators (Pogos), a major shift in the government’s policy direction announced by President Ferdinand Marcos Jr. back in July.

The implementation of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE), a key policy measure supporting flexible work arrangements, is also seen as a major contributor.

With vacancy rates remaining in the double-digits, the report said that the average asking rates per month have slightly decreased during the period to P1,003 per square meters (sqm) from P1,010 sqm in the previous quarter.

Although some prime and grade A developments in the National Capital Region (NCR) central business districts are maintaining steady headline rents this quarter, major developers have indicated that these rents are negotiable, said the firm.

On the other hand, developments outside these districts which are affected by the return of office spaces are offering more attractive headline rents, it added.

Cushman & Wakefield said this trend could potentially lower average rents in the short to medium term in these locations.