PH office space demand up 56% in H1 2024

Net demand for office space in the Philippines grew by 56% in the first half of 2024 but this is set to be partly addressed by over 780,000 square meters (sqm.) fresh supply that will be coming in the second half, Leechiu Property Consultants (LPC) said Thursday.

Data released by LPC showed that the cumulative net demand in the first half stood at 1.4 million sqm., while the net take-up was recorded at 445,000 sqm., the highest in the first half since the onset of the COVID-19 pandemic in 2020.

Gross demand for the first half was at 685,000 square meters. The information technology and business process management (IT-BPM) sector accounted for 268,000 sqm., followed by traditional demand with 229,000 sqm., Philippine Offshore Gaming Operators (POGOs) with 75,000 sqm., and the government with 113,000 sqm.

For the second quarter, the Bay Area in Pasay accounted for 35% or 98,000 sqm.; Makati City with 20%, or 57,000 sqm.; Ortigas, Mandaluyong, San Juan with 16% or 44,000 sqm.; Bonifacio Global City with 12% or 33,000 sqm.; Alabang with 9% or 24,000 sqm.; Quezon City with 6% or 17,000 sqm.; and Taguig City with 2% or 6,000 sqm.

"We're seeing a lot of live requirements giving us comfort for the second half of the year, but also being cautious knowing that there's still a lot of things that will enter the market," Mikko Baranda, LPC director for commercial leasing, said in a briefing in Makati City.

"Hopefully we'll be able to absorb that, and you know, by 2025, 2026, we experience a different kind of market where supply will be cut in half," he added.

Supply for the second quarter stood at 18.2 million sqm., after 125,000 sqm. of new completed buildings were added to the supply. However, only 98,000 sqm. were added to vacancy due to pre-commitments, bringing the total vacancy to 3.1 million sqm. Contractions for the period were at 84,000 sqm.

Barranda noted, however, that some 786,000 sqm. is anticipated to be added in the second half of the year, which includes 516,000 sqm. in Metro Manila, and 270,000 sqm. in the provinces.

"Moving forward with 2025, 2026, 2027, very little supply will come online. All buildings that were delayed in 2020 during COVID all got accumulated and injected in the last three years so you don't feel the market moving because it's also at a standstill," Barranda said.

POGOs

In terms of POGOs, which was previously one of the biggest drivers of demand, Barranda said a number of operators have already left the country amid the ongoing issues surrounding the industry.

"Today many of them have already left and they've left behind offices and residential units. There are still a good number that are here and we witness a few of them that are standing," he said.

"Now if they are completely… If they abandon the office completely, the existing units they have, of course, that is a large contraction that we will need to find ways to somehow fill up because they're still quite heavy in terms of the amount of space they have in the market," he added.

Earlier this week, Finance Secretary Ralph Recto said he recommended in writing the total ban of POGOs to President Ferdinand "Bongbong" Marcos Jr.

Finance Undersecretary Bayani Agabin in October 2022 said the country can recover the potential losses from the exit of POGOs in other industries with "high value added."

LPC chief executive officer David Leechiu earlier said that the country stands to lose over P100 billion should the POGO industry be forced out of the country.

The Association of Service Providers and POGOs (ASAP) also warned that some 23,000 Filipinos would lose their jobs if the operators are banned from the country. — VDV, GMA Integrated News