Metro Manila office and retail space rental rates continue to decline as more Philippine offshore gaming operators (POGOs) exit and new buildings are completed.
JLL Philippines said in its latest office market update released Tuesday that the rental gap between headline rates and discounted rental rates remains in the double digits, with rents trailing by about 10 percent due to supply pressure and elevated vacancy levels.
“Our latest data reflects a continued downward trend in office and retail rental rates due to persistent supply pressures and elevated vacancy levels,” said Janlo de los Reyes, head of research and strategic consulting at JLL.
“With new stock coming into the market and low pre-commitment levels, we expect rents to remain soft, providing tenants with favorable terms in the near term,” he said.
With the office rental market on a downward trend since the second quarter of 2023, de los Reyes projects this trend to continue, reaching around P9,070 per square meter per month by year-end.
About 125,000 square meters of new office supply is expected to come online by the end of the year, further softening rental prices.
He said some landlords retain rates to attract tenants, while others lowered rates to address prolonged vacancies, particularly in Parañaque and Pasay, which were affected by the exit of POGOs and Internet gaming licensees (IGLs).
While stable office take-up in existing buildings helped lower vacancy rates to about 19 percent, new buildings entering the market show low pre-commitment levels.
JLL expects vacancy rates to reach 19.2 percent to 19.7 percent by year-end and could exceed 20 percent over the medium term due to an influx of 1.1 million square meters of new office space over the next few years.
Vacancy trends vary across the metro, with move-ins and move-outs creating uneven occupancy levels in different districts. However, select areas with fewer new supply additions and steady take-up are seeing slight tightening in vacancy rates.
Demand for office space has shown resilience, with around 500,000 square meters taken up in the first nine months of 2024, representing an increase of 32.1 percent year-on-year.
The growth was driven by the business process outsourcing (BPO) sector and the long-term lease take-up of government agencies.
The Department of Foreign Affairs (DFA) leased space in Pasay’s Double Dragon Tower, while the Department of Trade and Industry took up space at Filinvest Building in Makati in the third quarter.
JLL expects annual office take-up to reach 600,000 to 700,000 square meters by year-end, reflecting stable demand.
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