This performance, Prime Philippines said, surpasses the United States and Europe, where occupancy rates are 62 percent and 60 percent, respectively.
The country’s robust showing is driven by a dynamic business process outsourcing (BPO) sector, which grows at 7 percent to 8 percent annually and a strong demand from government agencies.
The flexible workspace sector, projected to expand at a compounded annual growth rate of 15 percent globally through 2030, also plays a significant role. Unlike traditional office spaces with high capital costs and long leases, flexible workspaces offer short-term leases, catering to BPO companies, small businesses and freelancers.
Localized bubbles
Prime Philippines noted that since 2020, localized property bubbles have emerged in certain office Philippine markets, marked by speculative building and rapid rental increases in areas like Mactan Island and Clark.
While these bubbles began to deflate between 2020 and 2022, recovery has been quick, with national occupancy rates now exceeding 80 percent and Metro Manila at over 84 percent, although rental rates remain at 2016 levels.
But as rental rates will continue to soften, Grade A buildings prime properties will remain at the top of minds of BPO firms. Grade B and Grade C office buildings will continue to suffer.
To remain competitive, Prime Philippines urges landlords of these buildings to consider adaptive strategies including upgrading of facilities, offering more flexible lease terms and repurposing spaces for alternative use such as co-working for mixed-use development to maintain their tenant base.
Industrial sector
In the industrial sector, the Philippines has seen strong demand, with over 2 million square meters needed. This is fueled by foreign direct investments, especially in manufacturing.
Competitive labor costs and a sizable workforce of about 48 million enhance the country’s attractiveness.
Regional demand is highest in Davao, Bulacan, Cebu and Metro Manila, with logistics, manufacturing and wholesale sectors leading the way.
Demand for industrial space is segmented, with 53 percent attributed to logistics, 21 percent to manufacturing and 15 percent to wholesale and retail sectors.
Despite these positive trends, challenges persist, including underdeveloped infrastructure compared to ASEAN peers and higher electricity costs. Frequent changes in government policies also contribute to an environment of uncertainty for long-term investors.
Jettson Yu, chief executive and founder of Prime Philippines, says that while the industrial sector shows promising growth, addressing these challenges is crucial to sustaining progress and attracting long-term investments. Improvements in infrastructure, more stable energy costs and a consistent policy environment are essential for the continued success and expansion of both the office and industrial property markets in the Philippines.
