Office rents in Metro Manila continued to weaken in the first quarter of 2025 as vacancies persisted, despite a surge in leasing activity.

With no new Grade A office space delivered during the period and further construction delays pushing expected completions to the second quarter, building owners find themselves with more time to fill their properties—often by sweetening lease terms.

According to a report by real estate consultancy KMC Savills, the delay of a 200,000-square-meter pipeline initially set for Q4 2024—now rescheduled for Q2 2025—means Metro Manila’s new office supply has ground to a halt. Over the next four years, only 700,000 square meters of Grade A space is expected to enter the market, a steep drop from the 1.3 million square meters (sqm) added from 2022 to 2024.

Despite 191,000 sqm in transactions—up nearly 90% from the previous quarter—net absorption remained tepid at just 14,000 sqm. Much of the new demand came from major business hubs such as Makati CBD (21%), Bonifacio Global City (15%), and Ortigas Center (14%), with emerging submarkets like the C5 Corridor gaining traction due to accessibility. Still, tenant exits—especially by POGOs (Philippine offshore gaming operators) in the Bay Area and Makati fringe—continue to weigh heavily on occupancy.

Vacancy rates hovered at 20.6%, nearly unchanged from the previous quarter’s 20.7%, reflecting a market in equilibrium. However, average rents continued to slide across most districts. BGC, for instance, saw rates ease to P1,055.30 per sqm despite a fall in vacancy to 10.9%. In Ortigas, where net take-up jumped to 20,000 sqm, rents dropped the most—down P14 to P658.10 per sqm.

The growing preference for fitted or move-in ready offices—comprising 52% of all new leases—signals a shift toward operational efficiency as tenants look to speed up transitions amid market uncertainty.

Submarket highlights

Makati CBD saw strong demand, with 19,000 sq m of net absorption driving vacancies down to 18.8%, absorbing the blow from POGO exits.

BGC recorded a vacancy decline from 12.2% to 10.9%, though landlords trimmed rents to stay competitive.

Ortigas Center posted its strongest net take-up in quarters, but landlords responded to market pressures by slashing asking rents.

Quezon City posted a net absorption of -392 sqm, as tenants fled for more modern spaces elsewhere.

Alabang CBD recorded a modest take-up of 1,500 sqm, insufficient to budge its 30% vacancy rate.

Bay Area bore the brunt of POGO pullouts, recording a -39,000 sqm net absorption, with vacancies climbing to 27.5%.

With new completions deferred and net absorption uneven across submarkets, Metro Manila’s office sector continues to face a cautious recovery path.

Leasing activity is expected to remain tenant-driven in the near term, with fitted office spaces and competitive rental packages likely to sustain demand.

KMC Savills noted that sustained monitoring of occupancy trends, particularly in submarkets affected by POGO exits, will be critical in assessing long-term market stability.