Metro Manila office space demand to reach over 300,000 sqm in 2024

MANILA, Philippines — Net absorption of office spaces in the Metro Manila market is expected to expand to over 300,000 square meters in 2024, driven by demand from the information technology-business process management (IT-BPM) sector, according to a real estate services firm.

“New entrants and expansion of real estate requirements from the IT-BPM sector are expected to be reactivated in 2024,” Cushman & Wakefield said in its Asia Pacific Office Outlook 2024.

It said that after registering negative net absorption of 59,000 sqm in 2022, demand is expected to have returned to positive territory in 2023, reaching 340,000 sqm,   a 70-percent increase from a year ago.

“Net absorption is set to grow strongly in 2024 to over 300,000 sqm, with further incremental growth thereafter to 2027,” Cushman & Wakefield said.

It added that from 2024 to 2027, an average annual net absorption of 366,000 sqm is expected.

Despite the higher return to office rates in the local market, Cushman & Wakefield said that high vacancy rates are expected to persist as global corporate occupiers sustain hybrid work arrangements.

“The pending legislation that will allow local IT-BPM companies to implement remote work set-up is expected to affect the leasing activity in Metro Manila,” it said.

In terms of office supply, Cushman & Wakefield said  an average of 180,000-sqm of new supply per annum is expected in the next five years, 25 percent lower than the projected five-year new supply in 2022 and the 709,000-sqm average in the five years prior to the pandemic.

“A total of 327,000-sqm is expected to be completed in the fourth quarter of 2023, while the completion of some developments is expected to slide into early 2024,” it said.

The property services firm noted that some developers are already firming up plans for pipeline developments scheduled for completion after 2027.

Moreover, Cushman & Wakefield said Metro Manila office rents are expected to rise by roughly 0.4 percent year-on year by the end of 2023. “From there, rents are expected to grow on average by 3.2 percent per year up to 2027,” it said.