By Kevin Jara and Kath Taburada
AFTER YEARS of turbulence, the Philippine office market is finally gaining ground. The first half of 2025 shows clear signs of a sector that is not only recovering, but recalibrating. Metro Manila is holding steady, provincial locations are accelerating and demand drivers — traditional companies and the outsourcing sector — are proving resilient. With positive market indicators across the board, the market’s rebound is starting to look less of a short-term recovery and more like the start of the industry’s new growth phase.
METRO MANILA’S MOMENTUM IS REALMetro Manila recorded 446,100 square meters of transactions in the first half of 2025 — already surpassing half of 2024’s full-year total. This reflects a sustained recovery in office demand, especially among traditional and outsourcing firms. Notably, 70% of all transactions were driven by expansions and new setups, while the remainder involved relocations — often tied to flight-to-quality moves or space consolidation.
A closer look reveals that more than 80% of 3PO (third-party outsourcing) transactions were tied to business expansions, while over half of shared services firms were new entrants to the market. While large leasing transactions continue to make headlines, market activity in H1 2025 has been largely driven by small to mid-sized requirements, with 56% of recorded deals involving spaces below 1,000 square meters, and 36% between 1,000 to 2,000 square meters. Catering to small to mid-sized requirements entail flexibility from landlords. To better accommodate this demand, landlords are encouraged to remain flexible in their size offerings, especially in buildings with high vacancy.
VACATED SPACES ARE EASING — SLOWLY BUT SURELYOne of the clearest signs of market recovery is the decline in space surrenders. Metro Manila’s vacated spaces totaled 382,000 square meters in the first half of 2025, down 27% from the second half of last year. Of the total vacated space, POGO (Philippine Offshore Gaming Operator) firms accounted for 174,000 square meters, while non-POGO tenants made up 208,000 square meters. Importantly, non-POGO vacancies have been consistently on a decline since 2023, suggesting that more occupiers are opting renew their leases rather than exit the market altogether.
While recent discussions around online gaming operations have raised questions on its impact on the real estate sector, the actual footprint of these firms in the office market remains negligible. Online gaming operators occupy less than 1% of Metro Manila’s total office stock — merely a fraction of the total POGO footprint during its peak years and a reminder that the market has already moved on from their absence.
GROWTH BEYOND THE NATION’S CAPITALOutside of the National Capital Region, signs of growth are even more encouraging. Office demand in key provincial cities reached 159,100 square meters in H1 2025, up 28% year on year. Transaction volumes nearly doubled between the first and second quarters, pointing to sustained interest in regional expansion.
Cebu and Iloilo remain the strongest contenders, together accounting for more than half of all provincial transactions. Cebu’s office vacancy has fallen to 16.8% — its lowest since the pandemic — thanks to major expansions by established players and the arrival of new outsourcing firms.
Areas beyond traditional Tier 1 locations are beginning to draw attention from outsourcing firms. However, supply remains a key constraint as many of these locations lack BPO-grade office stock. Developers looking to future-proof their portfolios may find opportunity to address this underserved demand.
OUTLOOK FOR 2025The Philippine office market is clearly in a better spot than it was a year ago. It is growing, recalibrating, and becoming more geographically diverse. Now at the tail end of the POGO exit, the market is no longer defined by vacancy shocks but measured by the growth of its reliable demand sources.
Momentum is building on different fronts — office demand is rising, space surrenders are declining and expansion-led deals outpacing relocations. While traditional and IT-BPM players continue to lead the charge, activity is now more dispersed. Growth is no longer confined in Metro Manila. Regional hubs like Cebu and Iloilo are becoming genuine frontiers of demand, with other emerging locations beginning to register on occupiers’ radar.
Still, the road ahead isn’t without its challenges. High vacancy lingers in certain submarkets, hybrid work remains in flux, and geopolitical issues continue to affect leasing and investment decisions. Nonetheless, the early gains in 2025 suggest that recovery has momentum. Landlords must continue to meet the market where it is, while developers should consider strategic bets in high-growth provincial areas. For now, confidence is returning, and with it, the foundations for the next cycle of growth in Philippine real estate.
Kevin Jara is director and head of tenant representation, while Kath Taburada is senior market analyst, both at Colliers Philippines. For feedback, please e-mail kevin.jara@colliers.com.
