Office space demand up 25% in Q1

DEMAND for office spaces in the Philippines continues to grow, with transactions increasing by a quarter in the first three months of this year compared to 2023, consulting firm Leechiu Property Consultants (LPC) said on Tuesday.

Office take-up grew by 25 percent to 331,000 square meters (sqm) in the first quarter of 2024 from the 264,000 sqm recorded in the same period last year, LPC Commercial Leasing Director Mikko Barranda told a media briefing.

The figure is the largest single quarter demand in the last four years, topping the transactions reported in the first quarters of 2020 (158,000 sqm), 2021 (122,000 sqm) and 2022 (124,000 sqm).

“This growth is attributed to all industries, indicating a widespread and robust expansion in demand,” Barranda explained.

He said that there was sustained take-up in demand from traditional companies, particularly government agencies, alongside the information technology-business process management (IT-BPM) sector.

The Philippine Offshore Gaming Operator (POGO) sector, on the other hand, continues to take up space “despite regulatory changes and issues surrounding the industry,” Barranda noted.

Of the total transactions, traditional offices accounted for the lion’s share at 46 percent, or 151,000 sqm. This was followed by IT-BPM (38 percent or 125,000 sqm) and POGO (16 percent or 55,000 sqm).

The Philippine office market closed the first three months with a total vacancy rate of 18 percent, or 3.2 million sqm, staying static compared to previous years, the LPC director noted.

Almost half, or 48 percent, of the current supply consisted of buildings aged five years or younger, while 22 percent and 16 percent were buildings aged 6 to 10 and 11 to 20, respectively.

“An additional 90,000 sqm of newly completed buildings were added to the [first quarter of 2024 supply],” Barranda said.

Demand for office spaces reached 1.07 million sqm in 2023, 8.0 percent higher than the 988,000 sqm logged a year earlier.

Moving forward, Barranda sees the supply remaining persistent due to new buildings as companies look to reallocate their office portfolios.

“Projection for live demand is promising, which gives the real estate market confidence for the rest of the year,” he added.