Tilting toward growth: Real recovery in PHL office market amid disruptions

By Kevin Jara and Kath Taburada

AS 2025 draws to a close, the Philippine office market continues to demonstrate that it is entering a new phase of growth. The past few quarters have revealed a market that is recalibrating in response to changing occupier needs, economic headwinds, and technological disruptions. While the numbers reflect a true rebound in activity, the more compelling narrative lies in how the market is preparing for what comes next.

METRO MANILA PERFORMS BEYOND EXPECTATIONS
Metro Manila’s office sector has outpaced forecasts for 2025, with net take-up in the first nine months of 2025 already surpassing the full-year target. As of the third quarter (Q3), net absorption reached 215,000 square meters, well above the projected 150,000 square meters. This uptick in demand is largely attributed to sustained transaction activity and a significant decline in space surrenders following the exit of Philippine Offshore Gaming Operators (POGOs). With no significant POGO leases returning to market, surrenders are expected to continue easing in the months ahead. Most vacated spaces are now the result of natural lease expirations and non-renewals, rather than large-scale exits, an encouraging sign of market normalization.

Colliers Philippines also notes transaction volumes in Q3 2025 were the highest since the POGO ban, underscoring the market moving past earlier disruptions by POGOs. Traditional and outsourcing firms, which account for roughly 70% of leasing motivations, are leading the charge. Notably, Bonifacio Global City (BGC) emerged as the most active submarket, recording 193,000 square meters in office deals, largely fueled by expansions from third-party outsourcing and shared services firms.

Overall, Metro Manila’s vacancy rate eased from 20% in Q2 to 19.8% in Q3 2025, supported by low levels of space surrender and strong pre-leasing in newly completed buildings. With limited new supply expected for the remainder of the year, we anticipate vacancy to remain stable through Q4 2025.

C5 CORRIDOR EMERGES AS A RISING OFFICE HOTSPOT
The C5 Corridor, a newly defined submarket, is quickly establishing itself as a strong contender among Metro Manila’s more established CBDs, ranking third in overall transaction activity as of Q3 2025. A key driver of this momentum is Robinsons’ GBF Center 2 in Bridgetowne, which secured major deals from top outsourcing firms either expanding their footprint or entering the Philippine market for the first time.

Stretching approximately five kilometers from Bagong Ilog in Pasig to Libis in Quezon City, the C5 Corridor is poised for sustained growth. Developers with integrated townships along this corridor are expected to activate their office pipelines in the near term, potentially boosting total stock to around 900,000 square meters. With its strategic location, growing infrastructure, and increasing occupier interest, the C5 Corridor is shaping up to be one of Metro Manila’s most dynamic office destinations in the years ahead.

CEBU REIGNS IN THE COUNTRYSIDE
Provincial transactions reached 210,000 square meters as of Q3 2025, already surpassing activity recorded during the same period last year. Cebu continues to be the preferred destination for occupiers, posting 110,000 square meters in year-to-date office deals. It is now the second most active office market in the Philippines, trailing only Fort Bonifacio and outperforming all other Metro Manila submarkets.

Outsourcing firms are driving this expansion, drawn to the provinces by competitive costs, a growing talent pool, and improving infrastructure. These factors continue to position locations like Cebu, Pampanga, and Iloilo as compelling alternatives to the capital.

However, recent natural calamities in Cebu and Davao may temper this momentum in the short term. Colliers has observed that ongoing requirements, particularly expansions and new setups, have been paused as occupiers wait for greater stability in local conditions. While long-term fundamentals remain strong, near-term demand may soften as firms reassess their location strategies and business continuity plans in light of these disruptions.

CAUTIOUS OPTIMISM AMID EMERGING HEADWINDS
While the market’s trajectory is encouraging, stakeholders must remain vigilant as several macro and sector-specific risks loom on the horizon. One of the most significant disruptors is the accelerating adoption of artificial intelligence (AI), which is beginning to reshape the employment landscape. Some outsourcing firms have already initiated workforce reductions, signaling a shift in operational models. While AI promises long-term productivity gains, it may also lead to a recalibration of short-term real estate plans.

Adding to the uncertainty, the recent flood control corruption scandal also casts a shadow over investor sentiment, which may also affect leasing decisions in the country. On the international front, proposed US legislations, particularly the Hiring Incentives to Restore Employment (HIRE) Act and the Keep Call Centers in the United States Act, are being closely monitored. The passage, or failure, of these bills could affect the trajectory of the BPO sector, with implications for future location strategies and demand for office space.

Given these uncertainties, cautious optimism is warranted. The market is showing resilience, but the next chapter will require more than recovery — it will demand reinvention. Landlords must double down on asset upgrades, ESG integration, and tenant-centric innovations. Occupiers, meanwhile, should continue to diversify their portfolios, embrace hybrid work models, and prioritize flexibility in their real estate strategies.

The Philippine office market is at an inflection point. The traditional metrics, vacancy, take-up, and supply, remain important, but they no longer tell the full story. The future will be shaped by how well stakeholders adapt to new realities: climate risk, digital transformation, and evolving workforce expectations.

Kevin Jara is director and head of tenant representation while Kath Taburada is senior market analyst at Colliers Philippines.