The latest Colliers Philippines' office market report indicated that Metro Manila’s office sector posted an early recovery in the first quarter of 2025, with transaction volumes improving from last year's subdued performance. While the net take-up was positive, this set the pace of vacated space that slowed during the first three months of the year.

Colliers Philippines Director and Head Kevin Jara said, "We also recorded the first major pre-leasing activity since 2022, which also contributed to the positive net take-up. While overall vacancy across Metro Manila remains high, improvements were observed in primary business districts—most notably in Makati—where vacancy rates continued to decline. Meanwhile, demand for office space in provincial locations remained stable and on track with initial projections, underscoring a broadly resilient market." Metro Manila's vacancy rates improved with a net take-up of 77,000 sqm, or a 19.7 percent recovery, reflecting a positive turn gained in the first quarter of the year. According to Colliers, this rebound is being driven by renewed demand from the Third Party Outsourcing (3PO) sector and traditional occupiers, with expansion activity accounting for over half of all transactions.

The demand in Makati CBD, Bay Area, Ortigas CBD, Fort Bonifacio, and Quezon City is driven by expansion, while in the fringes of Makati, Ortigas, and Alabang, relocation is the top motivation.

Among the top transactions, 34 percent of new setups were seen in Fort Bonifacio, 20 percent in expansion in Quezon City, and 29 percent in relocations in Makati fringe.

"Fort Bonifacio is the fastest-moving market, while the previous leader in 2024, the Bay Area, is relegated to number six on the list," noted Jara.

The top traditional tenants cited were from government, transportation, travel, and logistics companies, and flexible workspace spaces.

The office spaces being vacated by POGO companies continue due to the government ban; however, the figure eased by 39 percent in the first quarter, as compared to the last quarter of 2024. This is an expected development since most POGO-related leases will end this year.

Colliers also reported a resurgence of pre-leasing activity, reflecting a growing tenant confidence in the market’s direction. These transactions were in properties such as Araneta Cyberpark Tower 3 and GBF Center 2 in Quezon City, Pioneer House in BGC, and Innoland Altaire in Makati fringe. The market research firm also forecasted a 150,000 net take-up, or a vacancy rate of 22 percent for 2025. However, the recovery is unfolding against a backdrop of constrained new supply. In 2024, office completions dropped sharply to 182,000 sqm from 611,000 sqm from the previous year, with notable additions including One Ayala South Tower and Park Triangle Corporate Center, according to the report by Colliers.

The report also underscored the limited projects in the pipeline combined with a sustained demand, the Makati CBD office market may shift in favor of landlords and may continue until 2028. However, this shift will depend on strategic zoning reforms and the timely redevelopment of aging office stock to meet evolving tenant needs.

A total of 3.3 million sqm are occupied by aging office buildings in operation for 30 years and more.

The zoning changes may also help revitalize Makati CBD based on the Makati Central Estate Association (MACEA) proposal.

"By 2029, we are expecting buildings for the country's largest stocks to come online after 2028, coming from BPI headquarters, BDO Corporate Center, Metrobank headquarters, and China Bank Makati Tower," as mentioned by Jara.

Colliers encourages tenants to take advantage of the current market conditions, as it is an opportune time to secure good deals. Tenants should also consider pre-leasing as part of their site-selection strategy, as early commitments can provide a first-mover advantage in locking in favorable terms. The firm also advises reviewing their rents, as it is crucial to remain competitive.

Outside of Metro Manila, the expansion of BPO firms continues to drive the demand for office spaces. Cebu, Pampanga, and Davao topped the list, with Davao recording a 6 percent vacancy rate in the first quarter of 2025. Provincial transactions involved 55,000 sqm of office spaces in the same period.