OVERALL Grade “A” and Prime office vacancy in Metro Manila remains steady at 16.83 percent by the end of 2023’s third quarter, which is a 6bps decline quarter on quarter (QoQ) from the reported vacancy of 16.90 percent in the second quarter and a 72bps increase year on year (YoY) from the reported 16.12 percent vacancy in the third quarter of 2022.

The return of office space by several occupiers is still prevalent in several submarkets in Metro Manila. Nonetheless, positive absorption figures are recorded overall, with roughly 38,000 sq m net absorption in Q3 2023, bringing the YTD net absorption to roughly 0.13 million sq m. These are brought on by several occupiers that have relocated or consolidated their office spaces in one location to take advantage of the prevailing high vacancies.

The outlook remains that vacancy figures are to improve as delayed transactions in 2023 are projected to come up online in the coming year.

While vacancies remain high in Prime and Grade “A” office spaces in Metro Manila, the majority of developers maintain steady headline rents in their developments.

Tetet Castro, director and head of Tenant Advisory Group at global real estate firm Cushman & Wakefield, attributed the marginal adjustment of vacancies “to the continued return of office by some occupiers in the city. Average asking rents, on the other hand, increased by 0.15 percent by endQ3 2023 to P1,042.17 / sq m / month from the posted average rent of P1,040.60 / sq m / month. While some landlords have adjusted their rents in some of their developments, majority are still keeping it steady while noting that their rents are still negotiable.”

Claro Cordero, the company’s director and head of Research, Consulting & Advisory Services, mentioned how current structural shifts in office space occupation sweeping the global market have also been manifested — despite the relatively higher returntooffice ratio — in the local market, particularly in major CBDs.

“Elevated vacancy rates are likely to persist, as global corporate occupiers brace for hybrid work arrangements and a new legislation is underway that will allow local ITBPM companies to implement remote work schemes,” he said.

Global shifts

He reiterated that the headline rents of prime developments in major CBDs remained stable.

Meanwhile, other developments in the decentralized districts post moderate decline due to the availability of office spaces from new completion and from the spaces which have remained vacant after the flight of Philippine offshore gaming operations (POGO) companies.

Despite the economic headwinds and the major structural shifts shaping the future real estate occupancy strategies of corporate office occupiers, the recovery of the office market postpandemic between the prime and nonprime markets may take on divergent trends.

Cordero said, “As large corporate occupiers chart their respective longterm real estate strategies, highquality developments will be in high demand as future occupancy requirements entail highly flexible building systems, lighting, design and space re-design flexibility, access to public transportation and set of amenities to suit the occupiers’ wants and the hybrid work schemes. This will exert undue pressure on lowquality buildings, especially those which cannot match the future market demands for office space occupancy.”

Cushman & Wakefield (NYSE: CWK) is among the largest real estate services firms, with approximately 52,000 employees in over 400 offices in approximately 60 countries. In 2022, the firm had revenue of $10.1 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services.