The POGO industry’s rapid contraction has left a measurable mark on Metro Manila’s office market, but the story is more nuanced than a simple vacancy spike. In the first half of 2025, total vacated office space in the metro fell 27 percent compared to the second half of 2024, settling at 174,000 square meters. Yet POGO-related vacancies still accounted for 53 percent of that total, meaning the sector’s exit remains the single largest driver of empty floors. The broader picture: Metro Manila’s office vacancy rate hit 20 percent in H1 2025 and is forecast to climb to 21.4 percent by year-end. That’s a significant number, but it doesn’t tell the whole story of who is filling the gaps and where.
The immediate question for property owners, investors, and tenants is whether the market can absorb this space — and what kind of demand will replace it. The data suggests a transition is already underway, driven by IT-BPM firms, banking and financial services, and healthcare tenants. But the pace and geography of that recovery vary sharply across submarkets.
Who Is Taking Up the Space
Office transaction volume rose 33 percent to 446,000 sqm compared to H2 2024, with 56 percent of deals under 1,000 sqm. That points to a market where smaller, flexible leases are replacing the large-block POGO tenancies of previous years. The shift matters because it changes how landlords design spaces and structure lease terms — fewer 5,000-sqm shell units, more fitted-out, ready-to-occupy floors.
Where the Vacancy Hits Hardest
Not all submarkets are feeling the POGO exit equally. The Bay Area saw the largest vacancy increase, jumping from 33.5 percent to 38.5 percent in H1 2025. That submarket was heavily dependent on POGO tenants, and its recovery will likely take longer. By contrast, prime office locations like Quezon City (96,000 sqm leased), Bonifacio Global City (82,000 sqm), and Makati CBD (59,000 sqm) continue to see active leasing, driven by traditional BPO and financial services demand.
One key detail: of the total Metro Manila office supply of 1.84 million sqm, 54 percent is vacated space while 46 percent is new and unleased. That means nearly half of the empty space has never been occupied — it’s newly built inventory that came online just as demand softened. Developers are now holding back, waiting for vacancy to decline before launching new projects. The annual supply pipeline stands at 14.65 million sqm, with about 359,000 sqm expected in H2 2025 and 277,000 sqm projected for 2026.
Complications That Change the Outlook
The 1 Million Sqm Vacancy Forecast
Office vacancies across Metro Manila are projected to reach 1 million sqm in 2025, driven primarily by POGO exits. That figure is not a sudden shock — it’s the cumulative result of phased pullouts over several years. What matters is the taper: analysts expect vacancy to begin declining around 2028 as IT-BPM growth absorbs the remaining space. That timeline is critical for anyone making leasing or investment decisions today. A five-year recovery window means short-term lease strategies may be safer than long-term commitments in high-vacancy submarkets.
Provincial Demand Is Real but Concentrated
Outside Metro Manila, BPO expansion is driving office demand in specific cities. Provincial demand reached 48,600 sqm in H1 2025, led by Cebu (31,550 sqm), Iloilo (14,200 sqm), and Pampanga (3,100 sqm). The top Visayas developers by leased area — Megaworld Development (18,500 sqm), Ayala Land (10,700 sqm), King Properties (4,300 sqm), Filinvest Land (3,600 sqm), and JEG Realty (3,000 sqm) — show that institutional-grade developments are attracting tenants. But the numbers also reveal how concentrated this demand is: Cebu alone accounts for 65 percent of provincial take-up. Cities like Bacolod, Dumaguete, and Tagbilaran are mentioned as emerging BPO destinations, but their current absorption is minimal.
The Relocation vs. Expansion Split
Seventy percent of H1 2025 take-up came from expansions or new setups; only 30 percent was relocations. That’s a healthy sign — companies are growing, not just reshuffling existing space. But it also means the market is relying on new demand rather than redistribution of existing tenants. If economic conditions slow BPO hiring or financial services expansion, the absorption rate could stall.
What This Means for Different Players
For Office Landlords in Metro Manila
The immediate priority is repositioning vacant space for BPO and financial services tenants. That often means investing in fitted-out floors, improved connectivity, and flexible lease terms. Landlords in the Bay Area face the toughest challenge — vacancy there is already 38.5 percent, and the submarket lacks the diversified tenant base of BGC or Makati. A strategy of lowering rents to attract anchor tenants may be necessary, but it risks setting a lower baseline for future leases. For landlords in Quezon City, BGC, and Makati, the picture is brighter: demand remains steady, and the shift toward smaller leases (56 percent of deals under 1,000 sqm) means faster turnover if spaces are configured appropriately.
For Investors Considering Office Assets
The current market favors buyers who can hold through a 3- to 5-year recovery window. Assets in prime locations with existing BPO or financial services tenants are less risky than speculative developments or buildings in POGO-heavy submarkets. The supply pipeline — 359,000 sqm in H2 2025 and 277,000 sqm in 2026 — means new inventory will continue to compete with existing vacancies, putting downward pressure on rents in less desirable locations. Investors should scrutinize a building’s tenant mix, lease expiry schedule, and submarket vacancy trend before committing.
For Tenants Looking for Space
This is a favorable market for office tenants, particularly those needing 500 to 1,000 sqm. With vacancy high and landlords eager to fill space, negotiating leverage has shifted. Tenants can expect more generous fit-out allowances, rent-free periods, and flexible lease terms. The caveat: lock in a deal before vacancy peaks in late 2025, as the forecast 21.4 percent vacancy rate may be the high point before gradual recovery begins. For companies considering a move to the provinces, Cebu and Iloilo offer the most established infrastructure and talent pools, but Pampanga is emerging as a viable alternative for those serving the Luzon market.
Frequently Asked Questions
Is the POGO exodus over? ▾
Will office rents drop significantly? ▾
Which cities outside Manila are growing? ▾
How long will it take for vacancy to return to normal? ▾
Are coworking spaces a good bet right now? ▾
What types of companies are replacing POGO tenants? ▾
The POGO exit has reshaped Metro Manila’s office market, but it hasn’t broken it. The vacancy numbers are real, and some submarkets face a long recovery. Yet the underlying demand from BPO, financial services, and healthcare is absorbing space at a measured pace, and the shift toward smaller, flexible leases may ultimately make the market more resilient. For anyone with exposure to Philippine office real estate, the next 12 months will be about watching which submarkets recover fastest — and which tenants drive that recovery.
If this was useful, you might also want to read our breakdown of the rent-versus-buy decision for young Filipinos.
Sources
Millennial homebuyers: what they want and how it’s changing the game — Explores how shifting tenant preferences in the residential market parallel the commercial office trends discussed above.
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A guide to flipping real estate contracts for OFWs — Offers a practical look at alternative real estate investment strategies during a market transition.
POGO pullout still weighs on office market recovery. BusinessMirror, July 2025.
POGO exit will still impact office space vacancies in ’25. BusinessMirror, July 2025.
