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Office MarketBeat Report

Claro Cordero Jr. • 26/07/2023


The momentum of Philippine economic growth is likely to be sustained in Q2 2023 despite the various local and global economic headwinds brought about by continued rising inflation levels and the recent round of policy rate hikes by major global economies. The resumption of business activities and the strong rebound of consumer spending catapulted the GDP growth rate to 7.5% in Q2 2022 and 6.4% in Q1 2023.

Headline inflation rates further eased in Q2 2023 at 5.4% from the published inflation rate of 7.5% in Q1 2023. Government outlook remains that average inflation will close at 5.4% by the end of the year. Unemployment rate further eased to 4.3% by end of May 2023, lower than the 6.0% reported level the prior year, as a result of the resumption of business activities in the services sector.


Overall Grade ‘A’ office vacancies in Metro Manila increased to 16.90% by end-Q2 2023, a 74-bps increase q-o-q from the estimated 16.16% vacancy rate in Q1 2023 and a 69-bps increase y-o-y from the 16.2% vacancy rates estimated in Q2 2022. The increase in vacancies in Q2 2023 results from the continued completions of developments in Metro Manila of roughly 0.13 million sq.m. and the return of office space by some occupiers as more companies engage in the hybrid work system. Despite overall vacancies increasing in Q2 2023, quarterly net absorption remains positive with roughly over 36,000 sq.m. recorded during the period.

Outlook remains that overall vacancies in Metro Manila will gradually improve in the latter half of the year as more companies become comfortable in having their employees return to office, as well as the projected growth and expansion of majority of the companies belonging to the IT-BPM sector.


With the prevailing high vacancy rates in Metro Manila, the average asking rents of Prime and Grade ‘A’ offices remained steady at PHP 1,041 per sq.m. per month by end-Q2 2023. Albeit a minor adjustment from the previous quarter’s average rent, this figure is a 0.21% increase y-o-y from the reported average asking rents of PHP 1,037 per sq.m. per month in the same quarter of the previous year suggesting the continued recovery of the office market fundamentals.


  • Completion delays have slowed – The delays in building completions have declined as only 40% of the expected new supply of office developments in Q2 2023 compared to approximately 60% during the same period in Q2 2022. Further, adjustments in building completions are currently averaging between 6-12 months compared to completion delays of 12-24 months during the same period last year. The improvement in the timing of development completion suggests renewed leasing activities coupled with the anticipated rebound in office absorption capacity in the medium term, as well as slow recovery in the global supply chain bottlenecks that hindered the movement of building and construction materials.
  • Occupiers readying for anticipated market turn in the medium-term – Large corporate occupiers are testing the waters and are keen to include the current market trends in their long-term real estate strategies. When reviewing various occupancy options, real estate occupiers are considering current occupancy trends (such as hybrid work set-up) and the eventual reversal of negotiation leverage towards the landlords’ favor in the market. Future occupancy needs include upgraded office amenities, security, technological connectivity, and improved access to public transportation that will attract more employees to work full-time in the office.


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