Home Economy Leechiu: Office space demand up 24% in first half; vacancy improves to 17% in Q2

Leechiu: Office space demand up 24% in first half; vacancy improves to 17% in Q2

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FIRST-HALF office space demand increased by 24% year on year to 685,000 square meters (sq.m.), driven by expansions in the information technology-business process management (IT-BPM), traditional corporate, and government sectors, Leechiu Property Consultants said on Thursday. 

“Transactions for IT-BPM have increased by 13% from the first half (1H) of 2023 to the 1H of 2024,”  Leechiu Property Director for Commercial Leasing Mikko Barranda said during a briefing.

“Leasing activity for government agencies increased by over sevenfold from 1H 2023 to 1H 2024,” he added.

Transactions for Philippine offshore gaming operators (POGOs) declined by 15% to 75,000 sq.m. from 88,000 sq.m. in the first half of 2023.

This is far from its peak in 2019, when POGO take-up reached 242,000 sq.m. in the first half of the year, and its full-year office take-up soared to 738,000 sq.m.

Second-quarter office demand increased by 22%, rising to 354,000 sq.m. from 290,000 sq.m. in the corresponding period last year.

VACANCYLeechiu Property reported a 1% decline in vacancy rate to 17% in the second quarter, with an available supply of 18.2 million sq.m. and 3.1 million sq.m. remaining unoccupied.

According to Leechiu Property, the second quarter saw an addition of 125,000 sq.m. of newly completed buildings to the office space supply.

“Only 98,000 sq.m. were added to vacancy due to pre-commitments of spaces,” it added.

Makati City had the highest supply at 3.8 million sq.m. during the second quarter, with 466,000 sq.m. vacant. Bonifacio Global City followed with 2.2 million sq.m. of supply and 195,000 sq.m. vacant.

Ortigas, Mandaluyong, and San Juan collectively had a supply of 3.2 million sq.m. during the period, with 545,000 sq.m. vacant. Quezon City saw 1.9 million sq.m. of supply and a vacancy of 377,000 sq.m.

The Bay Area offered 2.1 million sq.m. of supply with 301,000 sq.m. vacant, while Alabang had a supply of one million sq.m. and 246,000 sq.m. vacant.

POGO EXITThe Bay Area, where most of the POGOs are concentrated, led the demand breakdown in Metro Manila, increasing by 35% to 98,000 sq.m. in the second quarter of 2024.

This increase was attributed to POGOs, while government offices saw a 68% increase, Leechiu Property’s Mr. Barranda said.

“If they abandon the office completely, the existing footprint they have, 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.

The firm noted a 42% decrease in contractions to 84,000 sq.m. in the second quarter, down from 147,000 sq.m. in the previous semester. This decline was attributed to the absence of contractions resulting from the POGO industry.

Meanwhile, Leechiu Research and Consultancy Director Roy L. Golez said that for the residential segment, the Bay Area will experience a softening of prices, with units expected to be sold at a “discount” once POGOs have completely vacated the area. — A.R.A.Inosante

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