The country’s office vacancy level remains high and is expected to persist in a couple of years while full recovery could be taking a longer five years, according to the leading real estate consultancy group JLL. 

In a press briefing, Janlo de los Reyes, head of research and strategic consulting at JLL Philippines, presented the company’s research showing that office space vacancy level in the National Capital Region (NCR) remained in the double-digit level from the single-digit level of eight to nine percent pre-pandemic. 

As of the first quarter this year, the vacancy rate in the NCR was at 19.9 percent from 17.8 percent in the first quarter of 2023, and 20.3 percent in Q4 last year. This is because of new office space stocks coming in as against lower take up. 

In addition, JLL data showed new office stocks of 82,100 square meters (sqm) on top of the 107,900 sqm that came into the market in the last quarter last year. 

De los Reyes further said they estimated more than  500,000 sqm of new office space stocks available by end of  the year. This is expected to translate to an average vacancy rate of 20 percent by end of 2024, he said. 

Among the major central business districts (CBDs), JLL data showed that Paranaque City has the highest vacancy rate of 50.4 percent followed by Manila City with 38.1 percent, Muntinlupa City with 28.9 percent, and Quezon City with 20.9 percent. 

Comparatively, Bonifacio Global City registered the lowest vacancy rate of  9.1 percent followed by  Makati CBD with 15.4 percent, Mandaluyong with 17.1 percent, and Makati City with 18 percent.

He cited of “delayed” recovery in the office space leasing sector largely due to new structural developments happening globally, particularly the hybrid work arrangement and the exit of POGOs. 

“It’s a double-whammy effect,” he said noting recovery could be coming in a couple of years or full recovery over a five-year period. 

According to De los Reyes, the high interest rate regime is hurting companies more than the stubbornly high inflation rate.  In addition, office occupiers led by the business processing outsourcing sector, continues to rationalize their need for office space. 

Majority or 68 percent of moveouts or office space occupiers that gave up some of their offices are BPO firms and 32 percent are traditional corporates.  

Of total available office space of over 10.9 million sqms to date, the BPO sector accounts for 68. 9 percent and corporates with 31.1 percent. 

In terms of rents, De los Reyes said that rates are nearly unchanged from the pre-pandemic level of P1,100 to P1,200 per sqm. Rates are expected to average P1,000 to P1,100 per sqm this year.