Office space supply may run out by 2025

MANILA, Philippines — Office space supply in the Philippines may shrink to as low as 114,000 square meters by 2025 as a return to physical work and the comeback of offshore gaming may gobble up the available stock nationwide.

David Leechiu, CEO of Leechiu Property Consultants, last week said that office spaces may run out by 2025 with the projected recovery of the economy from the pandemic, as well as the expected relocation of Philippine offshore gaming operators (POGO).

“Many of you who are renewing in 2023 or 2024 have to be cautious because there is going to be a supply squeeze in the next four years,” Leechiu said in a webinar hosted by the European Chamber of Commerce of the Philippines.

Leechiu said there are 1.48 million sqm in available office spaces this year. More than half of this vacancy or about 851,000 sqm was abandoned by tenants when the pandemic erupted in the first quarter of last year.

However, this supply is seen to drop to 762,000 sqm next year, expand to 964,000 sqm in 2023, plunge to 388,000 sqm in 2024 and decline to 114,000 sqm in 2025. Office spaces in economic zones, likewise, are projected to remain tight to just 26,000 sqm by 2025.

“New stock is falling in the next four years. Demand is at its lowest today. However, demand can rapidly spike sustainably for the next 10 years, and that will produce a squeeze in office space, therefore, acceleration in rent,” Leechiu said.

Leechiu said there is a total of 1.4 million sqm in vacancy in Metro Manila, wherein nearly half are fragmented spaces scattered across 292 buildings.

Quezon City makes up the largest vacancy at 213,000 sqm, followed by Ortigas (145,000 sqm), Alabang (110,000 sqm), Makati (109,000 sqm) and Bay Area (98,000 sqm).

According to Leechiu, POGOs used to occupy over half of the available office spaces in Makati. POGOs have acquired no office space at all since the second quarter of 2020 as they wait for the passage of a legislation that will legalize their operations in the country.