Office space demand grew 8 percent in 2023 to 1.07 million square meters (sq. m.) on sustained expansion of the business process outsourcing (BPO) industry, according to Leechiu Property Consultants (LPC).
LPC director for commercial leasing Mikko Barranda said in a news briefing Wednesday the BPO sector remained the primary driver of demand for office leasing despite the current hybrid set-up.
The sector accounted for 450,000 sq. m. of demand as BPO firms continued to expand operations and hire more employees.
LPC said demand from Philippine offshore gaming operators (POGOs) remained positive, reaching 185,000 sq. m., most of which were in the Manila Bay Area in the cities of Paranaque and Pasay.
The figure, however, represented only 17 percent of total demand in 2023, down from the landmark years of 2018 and 2019.
LPC also noted a pick-up in demand from traditional offices, with deals averaging 500 to 1,000 sq. m .
“This means that there are new companies coming in the market,” Barranda said.
LPC expects demand to remain strong in 2024, as 520,000 sq. m. of current live requirements are expected to extend into the first half.
It said that as demand continued to increase, vacancy levels would decelerate starting next year. Office vacancy stood at 18 percent, totaling 3.3 million sq. m. A total of 418,000 sq. m. of office space were vacated this year.
LPC said that about 710,000 sq. m. of new vacancy will be dded to the supply by next year. Vacancy is seen going down to single digit levels by 2027 or 2028.
LPC said that for the residential market, 2023 marked the start of the recovery of the condominium sector, with sales rising 14 percent and launches jumping 66 percent.
LPC said developers started to gain confidence in the market as they launched new projects this year despite the continued fall-outs and back-outs from homebuyers.
It said demand drivers for the residential market include strong dollar remittances from overseas Filipino workers, positive outlook on the domestic economy, booming BPO sector and growing population.
It noted, however, that the increasing policy rates, inflation and geopolitical risks may continue to put pressure on vertical construction costs.