THE Philippine office market is the third strongest globally with an occupancy rate of 80 percent in the first half of 2024, real estate consultancy firm Prime Philippines said in its 2024 mid-year property report.
Its robust performance was driven mainly by the vigorous business process outsourcing (BPO) industry, which reported an annual growth of 7 to 8 percent, further boosted by the strong demand from government agencies and the expanding flexible workspace sector.
Prime Philippines Executive Vice President Cholo Florencio said that the Philippine office occupancy rate follows India, with an occupancy rate of 85 percent, and Singapore at the top with 88 percent.
(From left) Cholo Florencio, executive vice president, Prime Philippines; Ruth Coyoca, AVP Property Advisory VisMin Prime Philippines; Celeste Ilagan, COO, IT & Business Process Association of the Philippines or Ibpap; Romel Dellosa, AVP-Capital Markets & Investments, Prime Philippines; and Jojo Romarx Salas, head of Research and Advisory, Prime Philippines. CONTRIBUTED PHOTO
The Philippines is also way ahead of the US and Europe, which reported occupancy rates of 62 percent and 60 percent, respectively. Meanwhile, the worldwide average occupancy rate is 79 percent.
Florencio said the country office market’s high occupancy rate “emphasizes the Philippines as a very competitive player in the region, offering significant opportunities to local and international businesses.”
For 1H 2024, the total supply of office spaces in Metro Manila stands at 13.5 million, with an occupancy rate of 84.2 percent. In terms of lease rates, the overall average rent for Metro Manila is comparable to pre-pandemic rates, averaging P975 per square meter (sqm).
Within Metro Manila, most central business districts (CBDs) garnered an occupancy rate of 85-89 percent. As expected, Makati CBD, with a total of 3.5 million sqm of office space, had the highest occupancy rate at 87.9 percent.
The Bonifacio Global City (BGC), with 2.8 million sqm office space, followed closely at 86.5 percent occupancy rate. Quezon City, with 2.05 million sqm office space, and Ortigas CBD, with 2.9 million sqm office space, were neck and neck with occupancy rates of 85.7 percent and 85.6 percent, respectively. Alabang CBD, with 823,800 sqm, and the Bay Area CBD, with 1.4 million sqm office space, hit lows of 75.2 percent and 74 percent, respectively, due to the effects of the POGOs’ exodus.
In the regions, Metro Cebu had the highest supply of office spaces with 1.76 million sqm, followed by Metro Clark with 418,300 sqm and Metro Davao with 278,000 sqm. In terms of occupancy rate, Metro Davao performed best with 92.6 percent, while Metro Cebu, with 79 percent, and Metro Clark, with 75 percent, lagged behind.
BPOs
While its occupancy rate for 1H 2024 is an improvement from the past semesters’ 60 percent level, Metro Clark faces the challenge of filling up some buildings that were intended for the POGO industry. On the bright side, its Grade A and B buildings, plus discounted rental rates much lower than those in Metro Manila, are drawing tenants who want to expand their business and government agencies as well.
In terms of locations preferred, Quezon City, BGC and Makati were the top three. Outside of Metro Manila, Cavite dominated office demand.
For 1H 2024, the BPO industry accounted for 20 percent demand for office space, with the government accounting for 18 percent. It reported $35.5 billion in service revenue and employed 1.74 million full-time equivalents (FTEs).
For 2024, Celeste Ilagan, Information Technology & Business Process Association of the Philippines COO, expects “6 to 8 percent growth, 1.84 million FTEs, and revenue nearing $40 billion.”
On the other side of the coin, Prime Philippines identified the challenges that must be hurdled: high electricity costs, less attractive fiscal and non-fiscal incentives, complicated labor laws compared to Asean, and competing near-shore South American countries.
The rise of AI and ChatGPT will impact the IT-BPM sector, which has “partnered with government agencies to ensure manpower is upskilled and reskilled to handle higher-value jobs,” said Ilagan.
Prime Philippines, said Florencio, is promoting the country as a global prime BPO destination, capitalizing on the country’s lower cost of wages and a skilled workforce’s strong English proficiency.
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