Vacancy rates in Metro Manila’s Prime and Grade A office developments eased to 17.9 percent in the fourth quarter of 2025 from 18.3 percent in the third quarter, as leasing activity remained steady across major business districts.
Commercial real estate services firm Cushman & Wakefield (CWK) said in a report the 40-basis point decline reflects consistent demand in Makati, Bonifacio Global City (BGC) and Ortigas Centre. However, the market saw 190,000 square meters of new supply during the quarter, 36 percent of which remains vacant, tempering the overall improvement.
While occupancy rose, average rents for top-tier spaces fell 1.89 percent quarter-on-quarter to P1,093 per square meter. CWK attributed this slide to landlords in buildings with significant vacancies lowering rates to attract new tenants. Decentralized office markets saw rents hold flat at P815 per square meter, hampered by an elevated vacancy rate of 25.7 percent.
CWK director of research Claro Cordero Jr. said the improvement was led by new market entrants and tenants relocating to higher-quality buildings.
“The decline reflects steady leasing activity across the established CBD areas in Makati, BGC and Ortigas Center and well-placed decentralized office markets,” Cordero said.
Net absorption for Grade A developments reached 170,000 square meters by the end of 2025. This momentum was fueled by global capability centers (GCCs) and firms pursuing “flight-to-quality” strategies. CWK expects demand to remain steady over the next 6 months as companies continue to consolidate operations into modern, sustainable assets.
Average office yields slipped to 6.92 percent in the fourth quarter, down 1 basis point from both the previous quarter and the previous year.
Despite the slight dip, stable yields and lower borrowing costs following policy easing by the Bangko Sentral ng Pilipinas are expected to widen spreads and boost future demand for income-generating properties.
The report also noted a growing trend of landlords retrofitting aging structures to compete with newer, green-certified offices. While this may temporarily remove some stock from the market, researchers believe it will strengthen long-term competitiveness.
In the broader property sector, the retail landscape showed uneven recovery. Major malls in transit-oriented districts saw higher foot traffic, while the industrial and logistics segments maintained healthy occupancy in corridors like CALABARZON and Central Luzon.
Residential developers have shifted focus to clearing existing inventory, while the hospitality sector remains cautious due to the slow return of high-spending foreign travelers.
Office developments in primary CBDs are projected to stabilize further, with a potential rebound in rental rates expected by the second half of 2026.
