FOLLOWING a subdued performance in 2024, the Philippine office market posted a notable rebound in the first three months of 2025. The immediate recovery reflects a resurgence in occupier activity, signaling renewed confidence across key sectors. While external headwinds may persist in the coming months, current indicators suggest that the market has regained its footing and is positioned to build on this momentum.
EARLY GAINS IN Q1 2025Office leasing saw a strong rebound post-US election, with 237,600 square meters (sq.m.) of office deals recorded in Q1 2025 — marking a 66% quarter-on-quarter (QoQ) and 15% year-on-year (YoY). This mirrors the historical trend we’ve consistently observed: net demand typically recovers by around 40% in the quarter immediately following the US election period.
More than 60% of office deals were driven by traditional firms, followed by third party outsourcing and shared services. A closer look at traditional occupiers reveals a diverse mix of industries actively securing office space — from government and banking institutions to logistics, transportation, and flexible workspace providers. This diversity underscores that demand is no longer concentrated within the outsourcing sector alone and all types of occupiers are in the market looking for office spaces.
At the submarket level, Fort Bonifacio led in transaction volume, overtaking the Bay Area, which fell to sixth place. Much of the activity in Fort Bonifacio was driven by new entrants and the expansion of outsourcing firms, signaling its continued appeal. Makati Central Business District (CBD) posted the largest gains among major business districts, doubling its leasing activity QoQ despite limited space availability. In the provinces, demand remained steady, with Cebu, Pampanga, and Davao sustaining interest — particularly among business process outsourcing firms looking to expand outside Metro Manila.
PRE-LEASING MAKES A COMEBACKAn estimated 612,000 sq.m. of new office supply is expected to be delivered in 2025, with more than half concentrated in Quezon City, Bay Area, and the Makati Fringe. While vacancy is projected to remain elevated, a shift in occupier behavior is emerging. Interest in future-ready buildings has driven the return of pre-leasing activity — the first major movement of its kind in 36 months. As of Q1 2025, approximately 10% of new buildings scheduled for completion this year have been pre-leased. Though still below the pre-pandemic and pre-POGO average of 20%, this development signals a renewed sense of business confidence in the sector.
Given this shift, occupiers are encouraged to consider securing office spaces in buildings that are still under construction. By doing so, they can access prime locations at favorable terms and enjoy the added benefit of being first movers. As anchor tenants in these developments, they can align the building’s design with their specific workplace needs, securing a long-term advantage in the market.
RETAINED FORECASTS, MAKATI CBD A LANDLORD’S MARKET IN 2026Our full-year vacancy forecast remains unchanged, as macro headwinds — including trade tensions and geopolitical risks — continue to pose challenges for the office market. Additionally, the substantial volume of new supply scheduled for completion this year will exert additional pressure on vacancy rates, particularly in submarkets such as Bay Area, Alabang and Makati Fringe which were exposed to Philippine offshore gaming operators (POGOs). Despite these challenges, Q1’s strong performance provides optimism that leasing activity will remain steady, particularly in the capital region.
In contrast to the broader market trends, Makati CBD exhibits a distinct trend with its vacancy rate currently at 7.2% — the lowest among all submarkets in the capital. If this momentum continues, the business district is expected to enter a landlord’s market as early as 2026. This shift will be driven by minimal new supply over the next three years, which may leave occupiers with large or contiguous space requirements facing fewer available options in a high-demand area. While several bank headquarters are slated for redevelopment and are expected to come online starting 2029, this gap in supply may result in a protracted landlord’s market — unless portions of these upcoming HQ developments are opened to the market.
OUTLOOK FOR 2025Despite a seemingly cautious outlook, Metro Manila’s office market is showing early signs of recovery beneath the surface. Tenant-favorable conditions are expected to persist, varying by submarket, building performance, and developer portfolio. While recurrent headwinds may continue to impact the office sector indirectly, leasing activity has remained steady, reinforcing the view that the 2024 slowdown was a temporary setback. We remain optimistic that the early gains observed in the first quarter will set the pace for the rest of the year, paving the way for a more stable and dynamic office market moving forward.
Kevin Jara is director and head, and Kath Taburada is senior market analyst, both in Colliers Philippines’ Office Services – Tenant Representation team.
