MANILA, Philippines — The Philippine Offshore Gaming Operators (POGO) shutdown has left Metro Manila’s office market grappling with rising vacancies and weakened demand, with net office space absorption projected to plummet from 271,250 sq m in 2023 to just 1,500 sq m in 2024, according to real estate and services firm Cushman & Wakefield said.

In its Asia Pacific Outlook 2025 report, it said that despite a decline in new office supply, vacancy rates are expected to remain elevated, with recovery anticipated to be slow and uneven.

The sharp decline in office space absorption reflects the significant gap left by the departure of POGOs, which were once key drivers of demand in Metro Manila’s business districts. 

Over the next five years, the report said an annual new office supply is projected to average only 138,000 sq m, yet filling these spaces remains a challenge as demand struggles to keep pace.

The market is expected to stabilize starting in 2025 as new supply slows and demand picks up. By that year, rents are forecast to rebound slightly to P950 per square meter per month, reflecting a modest growth of 2.0 percent. 

This recovery is anticipated to gain momentum in the medium term, with rental growth accelerating to 4.0 percent in 2026, the report said.

By 2027, rents are expected to surpass P1,050 per square meter per month, with a sustained growth rate of 3.5 percent. 

The upward trend is forecast to continue through 2029, with rents reaching P1,150 per square meter per month, reflecting an annual growth rate of approximately 2.0 percent.

Cushman & Wakefield noted that as new supply completions decline, the risk of lease rollovers will decrease, reducing downward pressure on rents. Over the forecast period, rents are projected to grow at a compound annual growth rate of 3.5 percent.

Rental rates under pressure

Office rental rates are  likewise forecasted to drop by 2.8 percent in 2024 and 3.0 percent in 2025 as landlords respond to weakened demand with more competitive pricing and flexible leasing terms.

A modest recovery in rental growth, averaging 3.5 percent annually, is anticipated from 2026 to 2029, the firm noted.

Shifting tenant profiles

With POGOs out of the market, future demand is expected to center on the IT-BPM sector and Global Capacity Centers, alongside tenants prioritizing tech-enabled and sustainable office spaces. However, experts caution that these sectors may not fully offset the void left by POGO operators in the short term.

A long road to recovery

While challenges persist, the firm said that industry observers noted potential support from policy reforms, such as the CREATE More Bill, and continued expansion in the IT-BPM sector. 

The POGO ban

During his State of the Nation Address last July, President Ferdinand Marcos Jr. announced the prohibition of POGOs, citing their links to serious crimes and revealing the involvement of other government officials, including dismissed Bamban, Tarlac Mayor Alice Guo and former Presidential Spokesperson Harry Roque.

Marcos recently signed Executive Order 74, which imposed restrictions on POGOs, internet gaming licenses, and other offshore gaming operations in the country.

These operators were given until this month to halt their operations, after which they would face deportation to their respective countries.

Earlier this month, the Bureau of Immigration  announced that approximately 20,000 former POGO workers will depart the country by the end of the month.