Office space demand in the third quarter of 2024 fell 16 percent from the same period last year, according to LPC director for commercial leasing Mikko Barranda.
Nine-month demand for office space, however, reached 900,000 square meters, reflecting an 11-percent increase over the first three quarters of 2023.
Million sqm
Despite a decrease in office demand to 215,000 sq. m. in the third quarter of 2024, the year-to-date total remained robust.
The IT-BPM sector and traditional office markets were significant contributors to this trend. Government agencies added 119,000 sq. m. of demand.
“Given this, we are confident that we are on track to meet or even surpass last year’s leasing figures of 1 million sqm,” LPC said
Leasing patterns
Previously, tenants tended to move laterally to higher-quality buildings while keeping their space requirements steady. LPC, however, observed a change in leasing pattern with tenants now seeking both improved and larger spaces in new office buildings.
New firms from the US and other countries are also exploring offshoring opportunities in the Philippines.
Metro Manila remains at the forefront of office transactions, with the Bay Area leading in market share for office demand, primarily due to government agencies occupying 80,000 sq. m. in the first nine months of the year. Outside the capital, Cebu continues to dominate as the leading provincial market, bolstered by IT-BPM sector demand.
Live demand rose 27 percent in the third quarter of 2024, increasing from 457,000 sq. m. in the previous period to 581,000 sq. m. The IT-BPM sector accounted for 55 percent of this demand, with 319,000 sq. m. attributed to live accounts, while traditional office tenants represented the remaining 45 percent.
Office vacancy
Vacancy rates in the third quarter remained steady at 17 percent, primarily due to new building completions, adding 66,000 sq. m. and contractions totaling 147,000 sq. m.
LPC is expecting a decline in vacancy rates as the pipeline of new buildings is anticipated to be completed by 2025.
Despite these fluctuations, the total office vacancy rate in the Philippines remained at 17 percent, translating into 3.1 million sq. m. of vacant office space.
“Live demand saw a substantial 27-percent increase this quarter, rising from 457,000 sq. m. in the previous period to 581,000 sq. m. This sharp growth indicates a significant surge in market activity and interest, reinforcing our confidence in a strong finish for the year,” said Barranda.
“The momentum we’re witnessing also offers an encouraging preview of 2025, as we anticipate continued demand and steady growth in the market,” he said.
