While the residential market is reeling from the high interest rate environment, the office sector is off to a good start, with demand rising by 25 percent in the first three months of 2024.
At total of 331,000 square meters (sq.m.) of office demand was recorded in the first quarter of the year, which is the largest single-quarter demand recorded in the last four years, according to Leechiu Property Consulant director for commercial leasing Mikko Barranda.
This strong first quarter demand was fuelled by sustained take up in demand from traditional companies, primarily government agencies, as well as business process outsourcing (BPO) firms.
In the first quarter, BPO firms took up 125,000 sq.m. of space while traditional offices took up 151,000 sq.m.
Philippine offshore gaming operators (POGO) also continuous to take up space, with the signing of 55,000 sq.m. of space, despite regulatory changes and issues surrounding the industry.
Vacancy however remains at 18 percent, which is equivalent to 3,2 million sq.m. as additional 90,000 sq.m. of office space were added to the supply.
Inside Metro Manila, the highest vacancy rates are in recorded in Alabang and Bay Area.
Barrada however sees pipeline supply to start to taper off by 2025 and expects vacancy to drop to single digit vacancies starting 2028.
“It’s not an issue of demand, considering the positive trajectory we’re observing. Rather, it’s a supply challenge that requires time to address. However, we’re confident that it’s on its way,” Barranda said.