MANILA — Office space vacancy in Metro Manila has risen to 19.9 percent in 2024 based on the Real Estate Market Monitor by real estate services and investment firm CBRE.

This translates to nearly 1.8 million sqm of available office space. Of this number, 51 percent is under vacated spaces while 49 percent is unleased or has not been rented out.

The vacated spaces are due not only on the ban of the Philippine Offshore Gaming Operations (POGO), but also because of the downsizing or transfer of some IT-BPM companies. In fact, 32 percent of vacated spaces are from the IT-BPM sector, while POGO only comes in second at 31 percent.

“Most of the vacated spaces were not necessarily just from the POGO sector, but from the IT-BPM sector. They’re not leaving. They’re simply just downsizing in certain locations,” said CBRE Philippines Country Head Jie Espinosa.

He explained that many IT-BPM firms had to move to another location due to client preferences, while others opted to get a smaller space. NEO, one of the largest office building developers in Taguig, said there has been a slowdown in the office sector, and they are creating ways to build a community among tenants to entice employees to come to the office.

“Broadly office is really having a difficulty time. Whether it’s perception, whether it’s reality, I think all of us in the office sector, it’s not the most exciting time for some of us,” said Raymond Rufino, NEO CEO.

NEO Co-Managing Director Carlo Rufino added, “Our competition is really work from home.” He said they now organized various activities for tenants and their families to entice people to still go to the office and see how important it is to be physically present with friends and colleagues.

Despite a big vacancy rate, rental fees have not significantly gone down. Espinosa said some building management opted instead to offer tenants incentives like rent free for a certain period or other benefits.

But CBRE remains optimistic the 19.9 percent vacancy can still go down by the end of year. One of the reasons for the slowdown last year is the US elections when many American firms delayed decision making processes affecting transactions of US IT companies in the country. But Espinosa said, with the elections now over, many US firms have now started inquiring or in discussion about rental spaces in the Philippines.

“We’ve really seen strong inquiries and demand coming from the US healthcare sector… We also saw banking, financial services, and insurance companies sending out their shared services requirements, their outsourcing requirements here in the Philippines,” Espinosa said.

When asked if the vacancy will drop to single digit by 2027 as he forecasted in a previous event, Espinosa said it’s now more difficult to assess the situation because of many external factors. He is also on a wait and see mode on how the policies of the Donald Trump administration will affect American firms in the Philippines.