Manila Remains no. 1 Location for Expansion: Santos Knight Frank Survey
Most companies eye office expansion in the next 3 years; Manila remains No. 1 location for expansion: Santos Knight Frank survey
- Metro Manila remains a preferred area for expansion at 33% based on SKF’s recent occupier sentiment survey.
- Prime villages in Metro Manila CAGR continues to increase at 17% from 13%.
- Manila ranks 3rd in warehouse rental across Asia Pacific with 9.1% YoY growth.
- More than 8,000 hotel keys will launch in the Philippines in 2025 driven by increasing tourist arrivals.
The office sector is expected to continue its rebound trajectory in 2025. Tenants are expressing optimism regarding their office expansion and right-sizing plans over the coming years. This insight comes from global real estate services company Santos Knight Frank.
Santos Knight Frank’s recent occupier sentiment survey, The Collab, revealed 64% of companies surveyed see potential expansion in their office footprint in the next 3-5 years. One in every three indicated choosing Metro Manila as their preferred location for growth.
Overall, the commercial real estate sector has been thriving in 2024, fueled by outsourcing expansion and leasing activity. Despite limited supply in high-end and prime real estate, the sector continues to show stability and growth amid evolving market challenges.
Rick Santos, Chairman & CEO of Santos Knight Frank says: “The Philippine real estate sector is riding on a wave of opportunities driven by proactive measures from the current administration to open the country further to investments. These efforts are creating a more dynamic and business-friendly environment, paving the way for sustained development and progress.”
“Momentum in the market remains strong, particularly in the residential segment, where Manila has once again secured the top spot in Knight Frank’s Prime Global Cities Index. Demand continues to drive price growth in this sector, fueled by limited supply,” Santos adds.
He continues: “At the same time, the preference for green-certified buildings is on the rise, signaling a shift among occupiers toward highly efficient, sustainable, and cost-saving grade-A buildings. This year, we saw a 5% increase in green-building take-up, equivalent to _ gross leasable area. The shift from traditional to green-certified spaces can also imply their real estate strategy in their flight to quality,”
“The Marcos administration’s CREATE MORE Act promotes investment-friendly policies designed to stimulate business growth and demand for real estate. With these reforms, Manila presents a prime opportunity for investors to capitalize on its expanding commercial and industrial sectors.”
Improving Occupancy in Metro Manila despite the POGO Ban
In November, the Philippine government issued an executive order to cease operations of Philippine Offshore Gaming Operators (POGOs). This decision is expected to raise office vacancy rates, particularly in POGO-heavy areas. The Bay Area, a hub for POGO-related office space, will likely be significantly impacted. However, the city has demonstrated resilience, with vacancy rates lowering down by 7.2%% compared to 2023.
Manila is still a preferred location for the BPO sector
Manila continues to assert its position as a leading destination for business process outsourcing (BPO) companies, ranking as the third most affordable city in Asia Pacific for occupancy costs, according to Knight Frank’s Q3 2024 Office Highlights report.
Among Metro Manila’s prominent CBD areas, Taguig remains the preferred office choice, with a vacancy rate of 12.4% lower by 2 basis points compared to 1H of 2024. Additionally, green-certified buildings continue to see strong demand, with an average take-up of 87.27% compared to 82.39% from traditional office spaces, most notably in Makati and BGC.
- Tags:
- real estate market analysis
- Commercial Real Estate Philippines
- Philippines Trusted Real Estate
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About Santos Knight Frank
The world of real estate can be a difficult place to navigate. Whether property is your investment or a tool that drives your business success, you need a partner who can guide you in every step of the way.
Since 1994, Santos Knight Frank has been guiding Fortune 1000 companies, BPOs, private clients, and institutions in all facets of real estate. We advise companies on their best office, retail, and industrial location, oversee commercial fit-out projects, and manage facilities. We have facilitated over 4 million sqm of office transactions on behalf of clients and managed over 40 million sqm of real estate under our property & facilities management arm.
Our residential brokerage platform and wide collection of bespoke homes allow our private clients to buy, lease, and sell properties within their budget, timeline, and lifestyle.
For landlords and investors, we provide valuations and appraisal, consultancy and research, sales and leasing, and property management services across the Philippines.
Santos Knight Frank is part of the global Knight Frank network of over 384 offices in 51 markets, including the strategically important U.S. partnerships with Cresa (commercial real estate) and Douglas Elliman (residential real estate).
We are locally expert and globally connected, end-to-end and best-in-class – as any great partner in property should be.
Metro Manila is the Top Choice for Office Relocation in Santos Knight Frank Occupier Survey
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Read the third part of the report here.
C. Changes to Footprint in Current Location/s
With only 18 respondents indicating possible changes to footprint in current locations, 81% expect a considerable level of stability in terms of leased area in current locations.
Among those who do expect footprint changes, 56% expect significant increase, while another 17% expect slight increase. Nobody chose the possibility for significant decrease, but 28% do expect some slight space contraction.
After more than 4 years into the onset of COVID-19, it is of our belief that most occupiers have already arrived at a comfortable footprint that their current operations require. Both expansions and contraction at this point are likely caused by operational changes.
Comparing the results of the local occupier sentiment survey and the results of the 2023 (Y)Our Space Report by Knight Frank Cresa, a lot more of Philippine-based companies are expecting no changes in their footprint. And while globally, more companies are expecting growth within in their existing real estate portfolio, there are also less Philippine-based companies that are expecting to downsize.
D. Relocation
Relocation is a real estate strategy that a lot of occupiers practiced during the pandemic usually for one of two reasons: practical considerations due to the financial impact brought about by the pandemic, or the more celebrated flight to quality.
With most leases following a typical 5-year lease term, lease acquisitions that commenced in the last pre-pandemic year – 2019 – are expiring this year, opening an opportunity for relocation to either a cheaper or better building, or both. It must be highlighted that 2019 has the highest annual net absorption in Metro Manila’s office market history at 833,000 sq.m.
The results of our Occupier Sentiment Survey show that only 13% of respondents are considering to relocate. Of those that do, 75% want to relocate in Metro Manila – and all of them are either primarily based in Metro Manila, or at least have presence in Metro Manila already.
Other areas sought for relocation are Metro Clark, Metro Cebu, CALABARZON, Bacolod, and other parts of Visayas.
Among the respondents who are likely to relocate, 83% listed better accessibility for current employees as the top consideration for relocating. This resonates with the concept of hub-and-spoke model wherein smaller offices near employee residences are made available as an alternative to going to their main office. This also supports how a number of respondents have multiple locations with Metro Manila, and a good number also plan to expand within Metro Manila as well.
Lower occupancy cost emerged as the second biggest reason for relocating while better quality of building came as third. Better access to talent had the least share relative to the others perhaps indicating a not-so-aggressive outlook when it comes to hiring new talent for the meantime.
Flight-to-quality continues to be seen as a demand driver for higher-grade buildings, especially since the rental gap between older, less-efficient buildings and newer ones have been shrinking. Furthermore, negotiability in commercial terms continues to be generally wider as compared to pre-pandemic times, so occupiers can find that a lot of the recently-completed buildings can offer more cost-efficiency.
Relocation, as well as the other aforementioned general real estate strategies, are all geared to bring about a workplace that meets the demands of evolving workstyles. The COVID-19 pandemic has turbocharged workplace evolution and while there is no one-size-fits-all strategy, occupiers are adopting what best suits their particular requirements.
The Office of the Future
The COVID-19 pandemic has undoubtedly impacted workplace dynamics. The concept of remote work, while already existing in the past in the form telecommuting, served as the saving grace of businesses at a time of lockdowns and social distancing.
With the help of science, going back to the office became possible – but in a manner much different from before. Varying degrees of implementation of hybrid work setup defines the modern-day workplace, and this affects not only the physical presence of people in the office, but also how offices are designed. Occupiers try to strike the right balance in terms of location, footprint, and layout.
More than 4 and a half years after the first community quarantine was announced, occupiers likely understand by now what kind of office setup works for their particular needs. And as occupiers endeavor to attain a future-ready office, the adoption of sustainability is also no longer just an aspiration, but a course of action that more and more are trying to set foot into.
The office of the future is therefore a play on the definition of sustainable development: an office that meets the workplace needs of occupiers without compromising the ability of future occupiers in meeting their own workplace needs.
You have reached the end of the report. You can download your own digital copy at https://bit.ly/thecollabspecialreport.
- Tags:
- real estate market analysis
- real estate market research
- real estate market updates
- Commercial Real Estate Philippines
- Philippines Trusted Real Estate
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Find media contacts, and get access to news releases and announcements.
About Santos Knight Frank
The world of real estate can be a difficult place to navigate. Whether property is your investment or a tool that drives your business success, you need a partner who can guide you in every step of the way.
Since 1994, Santos Knight Frank has been guiding Fortune 1000 companies, BPOs, private clients, and institutions in all facets of real estate. We advise companies on their best office, retail, and industrial location, oversee commercial fit-out projects, and manage facilities. We have facilitated over 4 million sqm of office transactions on behalf of clients and managed over 40 million sqm of real estate under our property & facilities management arm.
Our residential brokerage platform and wide collection of bespoke homes allow our private clients to buy, lease, and sell properties within their budget, timeline, and lifestyle.
For landlords and investors, we provide valuations and appraisal, consultancy and research, sales and leasing, and property management services across the Philippines.
Santos Knight Frank is part of the global Knight Frank network of over 384 offices in 51 markets, including the strategically important U.S. partnerships with Cresa (commercial real estate) and Douglas Elliman (residential real estate).
We are locally expert and globally connected, end-to-end and best-in-class – as any great partner in property should be.
