While the Philippine office market had a good start this year, there are several potential headwinds that may impact its performance moving forward, according to a commercial real estate services firm.
During the Pagtanaw 2025 market monitor last week, CBRE Philippines Tenant Representation Director Garri Amiel Guarnes reported that the country’s office market registered over 220,000 square meters (sqm) worth of transactions in the first quarter of the year.
“In the first three months of 2025, we saw the largest first quarter since the start of the pandemic,” Guarnes said.
Metro Manila accounted for the bulk of the transactions at 156,000 sqm, an increase from 131,000 sqm in the same period last year and 151,000 sqm in the fourth quarter of last year.
“As I mentioned, Metro Manila accounted for about 160,000 square meters. So that’s about a 73 percent ratio with the rest about 27 percent coming from provincial markets. And we saw steadily the provincial market catching up from previous quarters,” Guarnes said.
“In fact, if you compare it to the first quarter of 2024, provincial transactions only accounted for about 15 percent; and during the fourth quarter of last year, provincial transactions were at 21 percent,” he added.
In terms of demand profiling, CBRE Philippines noted that the information technology business process management (IT-BPM) sector accounted for the bulk of the demand during the first quarter at 56 percent.
This was followed by traditional occupiers with a 35 percent share of the demand. In addition, agile occupiers accounted for a four percent share of the demand, while government agencies had a two percent share in the first quarter of the year.
Meanwhile, figures from CBRE showed that average take-up also increased to 1,422 sqm meters from 1,036 sqm in the previous year. However, on a year-on-year basis, take-up was lower than the 1,570 sqm registered in the first quarter of last year.
“So, in as much as we had a great start to the year, we’re still dealing with the exit of POGOs. As we all know, last year, our president banned the operations of POGOs, and we saw how the market reacted to that,” Guarnes said.
“In fact, for the first quarter of 2025, we actually have negative absorption for Metro Manila, so that means vacated spaces and new supply outpace the amount of demand that was transacted during the first quarter,” he added.
CBRE said Metro Manila vacancy level registered at 20.1 percent in the first quarter as contractions and new completions outpace demand.
It highlighted that Metro Manila has an availability of 1.8 million sqm of office space. Of the total availability, 53 percent or 966,700 sqm are vacated spaces, while 46 percent or 822,700 sqm are unleased spaces. In addition, one percent or 424,600 sqm account for new spaces.
Alabang registered the highest vacancy rate among Metro Manila business districts at 33.6 percent with a total of 253,900 sqm of available spaces.
The Bay Area followed closely with a vacancy rate of 33.5 percent with a total of 363,200 sqm of available space.
Other business districts also posted double-digit vacancy rates such as Quezon City (25 percent), Makati (20.5 percent), and Ortigas (16.8 percent).
In contrast, Fort Bonifacio recorded a vacancy rate of 9.7 percent with a total of 253,200 sqm of available office space.
“Moving ahead, in as much as we had that great start to the year, we’re also anticipating headwinds. We all know about the tariffs and the trade war that’s happening right now,” Guarnes said.
“For the IT-BPM sector, while there is no direct effect relating to the tariffs, this trade war will indirectly force companies, who are into saving costs or into wanting to derive savings, to hold off or postpone any entry or expansion plans for the Philippines,” he added.
Aside from the trade war, the CBRE official also cited the looming threat of artificial intelligence (AI) as another potential headwind for the office market.
“It’s been there for a couple of quarters or years already, but again, it’s starting to take root in how occupiers are operating for our contact center industry. So that means the AI is a potential replacement for menial tasks, and the focus is now more on skilling and moving on to higher skills in a more complex task that AI couldn’t easily replace,” Guarnes said.
“But again, AI is there as a potential threat, and so the occupiers are looking to respond to this by upskilling and even adopting it with regards to their day-to-day operations,” he added.
Guarnes also cited the upcoming midterm elections as another potential headwind, as this may affect the decision-making of occupiers as they would be on the lookout for major shifts concerning the balance of the political landscape, or even shifts in terms of policy.
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