In its latest Marketbeat report for the Metro Manila office market, Cushman & Wakefield Philippines said that the overall vacancy rates for Prime and Grade 'A' Office developments in Metro Manila rose by 280 basis points (bps) quarter-on-quarter (q-o-q) in the third quarter of the year and by 136 bps compared to the previous year.
"The average vacancy rate reached 18.2 percent, the highest level estimated by Cushman & Wakefield Research since Q2 2004, marking an increase of over 1,380 bps since Q2 2020," Cushman & Wakefield said.
It noted that an additional 114,000 sqm of office space was added to the market in the third quarter.
"This, along with the significant volume of returned office spaces due to major corporate occupiers rationalizing their office needs, has increased the volume of vacant spaces," it added.
The real estate services firm noted that in the medium term, vacancy rates are expected to remain high due to the total ban on Philippine Offshore Gaming Operators (POGOs) and the implementation of the CREATE MORE Bill, which supports flexible work arrangements and will likely result in more vacant spaces.
"The Metro Manila office market is exhibiting a slower-than-expected recovery in Q3 2024. Overall vacancy rates have steadily increased and average headline rents have marginally declined again this quarter, making the market more favorable for tenants. The initial effects of the total POGO ban and amendments to the CREATE Bill are already being felt in Q3 2024," Cushman & Wakefield Philippines Director and Head of Tenant Advisory Group Tetet Castro said.
"Several returns of office space are observed, coupled with the completion of new developments, have resulted in the increase in overall vacancies. In the medium term, elevated vacancy rates and lower headline rents in the Metro Manila office market are expected," Castro added.
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