The Philippine office real estate market is increasingly becoming a tenant’s market, with competitive lease and growing demand for outsourcing.
The ripple effects of the Trump administration’s restrictive immigration and border policies are contributing to a rise in offshoring to cost-effective markets like the Philippines, according to Ric Santos, chairman and chief executive of Santos Knight Frank.
“Trump’s push for efficiency has spurred U.S. companies to outsource more. This creates a significant opportunity for the Philippines, where competitive lease rates and a business-friendly environment are attracting global firms to expand their operations,” Santos said in a quarterly office update Thursday.
The country’s tenant-friendly market has been further highlighted in Santos Knight Frank’s survey, The Collab, which shows that 64 percent of companies plan to expand their office footprint in the next three to five years. Metro Manila remains a favored location, with one in three companies choosing the capital as their primary growth hub.
The demand is bolstered by the Philippines’ position as the third most affordable city for office occupancy in Asia-Pacific, as reported in Knight Frank’s Q3 2024 Office Highlights.
This affordability, paired with competitive lease rates, continues to drive interest from business process outsourcing (BPO) companies and shared service centers.
As businesses seek cost efficiency, the shift from traditional office spaces to sustainable, green-certified buildings is becoming more pronounced.
LEED-certified buildings, which have an 87.27 percent average take-up rate compared to 82.39 percent for traditional spaces, align with tenant demands for lower operational costs and enhanced corporate sustainability.
“Green-certified buildings are driving the flight to quality, as tenants prioritize efficiency and sustainability while taking advantage of favorable lease terms,” Santos said.
Despite challenges such as the government-mandated closure of Philippine offshore gaming operators (POGOs), the real estate market has shown resilience. The Bay Area, previously reliant on POGO tenants, is seeing a manageable impact, with vacancy rates still trending lower than in 2023.
The Philippine market is also benefiting from reforms under the Marcos administration, including the CREATE MORE Act, which promotes investment and supports economic growth. These policies, combined with the affordability and flexibility of the local office market, make the Philippines a top choice for expansion.
“Trump’s real estate mindset, focused on maximizing efficiency and strategic growth, resonates with the opportunities we see here. The Philippines is a prime destination for global businesses looking to optimize costs while accessing a skilled workforce,” Santos said.