The information technology-business process management (IT-BPM) industry will continue to drive occupancy rate in the Philippine office market this year, according to a top executive of a commercial and industrial real estate service company.
Based on the 2024 Philippine Property Market Outlook report, tenancy levels in Metro Manila improved by more than 4 percentage points to 83.9 percent in the fourth quarter of 2023 from the previous year’s 79.7 percent.
“Major CBDs [central business districts] such as BGC [Bonifacio Global City], Makati and Ortigas proved to be the most resilient,” Prime Philippines Founder and CEO Jettson Yu said in a recent media briefing held at their office in Ortigas.
According to the report, the highest occupancy was recorded in BGC where 89.8 percent of the 2.6 million square meters (sq m) of office space were taken up, followed by Ortigas at 85.4 percent of 2.67 million-sq m office stock, and Makati at 85.2 percent of 3.4 million-sq m office inventory.
Rental rates in these areas, though, are still below “pre-pandemic levels” by a median of around “20 percent to 30 percent.”
Other office markets outside these key CBDs, however, continue to be “slowly picking up,” according to Yu.
What pulled down the office sector’s performance is the Bay Area, which recorded an occupancy rate of only 69.9 percent at the time of the review.
“[It] continues to be the most challenged [as] there are still spaces vacated by POGOs [Philippine offshore gaming operators] that are waiting for occupiers.”
Alabang was another area that recorded an occupancy rate of less than 80 percent. In the fourth quarter of 2023, occupancy rate in the area stood at 76.7 percent.
With the resumption of face-to-face work setup, office tenants now have an opportunity to demand for more locations, thus, resulting in a better occupancy rate this year.
“So we’re seeing by 2024, this will continue to slightly improve, maybe around 84 percent or 85 percent, because there are new supplies coming into the market,” said Yu.
According to Prime Philippines’ study, Metro Manila recorded 12.6 million sq m of office spaces recorded in 2023, up 3.3 percent compared with the 2022 figure.
Around 175,000 sq m of office stock was added to the aggregate inventory in the metropolis on the back of completed office developments by major players last year.
Other notable projects in the pipeline, such as the One Vertis Plaza in Quezon City, Cyberpark 3 in Araneta City, and 387 Filinvest in Makati are projected to bring the overall supply to about 13 million sq m by 2024 and 2025.
Yu expects the primary tenant for the existing and upcoming office stocks would still be the IT-BPM sector, which is expected to grow by 7 percent this year.
“Some BPO [business process outsourcing] firms are bringing people back to work. And there’s also a lot of resistance still from people who’ve been working from home for a long time,” he said.
For instance, in niche markets such as Iloilo, Bacolod, Davao, Pampanga and certain key provinces, he sees a demand for “work from home” to “walk from home.”