The Future of Office Spaces in the Philippines: Why Traditional Leases Are Struggling and Flexible Workspaces Are Thriving

The Philippine commercial real estate market is undergoing a seismic shift. Vacancy rates in Metro Manila, Cebu, and Clark have hit record highs, reflecting an oversupply of traditional office space. Meanwhile, the demand for flexible workspaces continues to surge, driven by hybrid work trends, cost efficiencies, and shifting corporate real estate strategies.

At KMC, we’ve been able to maintain over 90% occupancy even as traditional office landlords struggle. We’re not just holding steady—we’re expanding in Metro Manila and Cebu because we see where the market is headed. Companies that once signed long-term office leases are now choosing flexibility, and not all flexible office providers are created equal.

This article breaks down the 2024 Philippine commercial real estate market trends, why high vacancy rates persist, and why flexible workspace solutions like KMC’s continue to thrive.

At the start of 2024, Metro Manila’s office vacancy rate stood at 19.8%, a historic high. This was up from 19.3% in 2023 and just 6-7% before the pandemic. The combination of overbuilt supply, corporate downsizing, and the exit of POGOs (Philippine Offshore Gaming Operators) has left many landlords scrambling to fill space.

While some landlords have tried to hold firm on pricing, the reality is office rents are declining. In 2024, Grade A office spaces in Metro Manila dropped to an average of ₱970 per sqm per month—down from pre-pandemic rates of ₱1,100 per sqm. In prime locations like Makati and BGC, landlords are offering rent-free months and fit-out subsidies just to keep tenants. But incentives alone won’t reverse the trend.

Companies today need flexibility more than ever. Many are downsizing their footprints, relocating to higher-quality buildings, or shifting to flexible office spaces that don’t require them to commit to 5- to 10-year leases.

Cebu has long been the top provincial office market in the Philippines, favored by outsourcing companies and multinational corporations. In 2023, Cebu accounted for 54% of all non-Manila office transactions, and demand remained steady into 2024.

Yet, vacancies remain elevated. Office vacancies in Cebu stood at 20.4% at the end of 2023 and are projected to hit 21-22% in 2024 due to new supply coming online. In 2024 alone, developers are set to deliver over 107,900 sqm of new office stock—twice the amount completed in 2023. For tenants, this means more choices and better deals. But for landlords, it’s an increasingly tenant-favorable market where price and flexibility are key.

Clark, Pampanga, has been positioned as an emerging office hub due to tax incentives and new infrastructure investments. However, its office market has struggled to gain traction.

Vacancy rates in Clark reached 31% in 2024, the highest among major Philippine cities. This is largely due to speculative development—too much office space was built before demand materialized. With roughly one-third of office space sitting empty, landlords in Clark are aggressively competing on price.

That said, we see potential in Clark as more companies adopt a hub-and-spoke model, setting up regional offices to support decentralization. This is why KMC has recently opened a new flexible workspace in Clark, giving companies an alternative to traditional leases in an area with long-term potential.

Across Metro Manila, Cebu, and Clark, traditional office landlords are struggling with high vacancies, while flexible workspace providers are thriving. Why? Because companies today demand agility, cost efficiency, and premium work environments—all of which flexible office solutions provide.

1. Hybrid Work Models Demand Flexibility

Over 50% of Filipino employees prefer hybrid work, meaning companies no longer need massive office footprints. A traditional lease locks a company into fixed space for years, whereas a flexible office allows for scaling up or down as needed.

2. Cost Savings Without CapEx

Signing a traditional lease comes with hefty upfront costs—fit-out expenses, security deposits, IT infrastructure, and long-term commitments. In contrast, a serviced office from KMC comes fully furnished, with enterprise-grade internet, meeting rooms, and front-desk services included.

3. Location, Amenities, and Employee Experience

Today’s workforce expects a premium work environment—high-quality interiors, seamless tech integration, and workplace wellness amenities. KMC designs offices like hotels—professional, sophisticated, and welcoming. Many of our spaces are WELL certified, promoting health and well-being, which is why companies choose us over bare, outdated office floors in traditional buildings.

Not all flexible office providers are the same. KMC is the largest Philippine-owned flexible office operator, with over 1.2 million sqm across 30+ locations nationwide, and 91% occupancy across our portfolio.

Here’s why KMC has maintained market leadership:

• Premium Workspaces: Our offices aren’t just desks in a room; they’re designed for productivity and collaboration, with high-end furnishings and hospitality-level service.

• Scalability for Growing Businesses: From solopreneurs to Fortune 500s, we offer solutions that scale with business needs—whether it’s a single desk, a private suite, or an entire managed floor.

• Nationwide Network: We operate in Metro Manila, Cebu, and Clark, allowing companies to establish multiple satellite offices with a single provider. Enterprise-Grade IT & Security: Unlike some coworking spaces that rely on basic commercial broadband, KMC provides secure, enterprise-grade IT infrastructure for high-performance business operations.

• Strong Landlord Partnerships: Developers like Filinvest have partnered with KMC to integrate flexible workspaces into their buildings, recognizing the growing demand for plug-and-play office solutions.

The Philippine office market is at a crossroads. Traditional office space is oversupplied and underutilized, while flexible workspaces are experiencing record-high demand. Companies no longer want to be tied down to long-term leases—they want options.

For landlords, this is an opportunity to rethink office space. The future isn’t just traditional leasing—it’s a mix of long-term tenants and flexible workspace solutions that complement corporate real estate strategies.

If you’re a company looking for an agile office solution—or a landlord looking to future-proof your building—let’s talk. Because the future of work is flexible, and KMC is ready to build it with you.

APPENDIX / SOURCES:

Metro Manila Office Market Trends

Colliers Philippines – Metro Manila Office Market Report (Q4 2024)

Vacancy Rate: 19.8% in early 2024 (up from 19.3% in 2023 and 6-7% pre-pandemic)

New Office Supply: 182,400 sqm completed in 2024; ~655,000 sqm projected for 2025 Office Demand: 751,000 sqm leased in 2024, but net negative absorption of –45,100 sqm

JLL Philippines – Q3 2024 Real Estate Market Overview

Grade A Office Rents: Down to ₱970/sqm (compared to ₱1,100 pre-pandemic)

Lease Incentives: Rent-free months, fit-out subsidies being offered by landlords

BusinessWorld – Office Space Completions in Metro Manila Fell Below Projections in 2024, Says Colliers

Market Outlook: Vacancy expected to rise to 22% in 2025 due to new supply Cebu Office Market Trends Colliers Philippines – Cebu Office Market Report (Q4 2024)

Vacancy Rate: 20.4% at end-2023, forecasted to hit 21-22% in 2024

New Supply in 2024: 107,900 sqm coming online (double the 2023 amount) Office Transactions: 112,900 sqm leased in 2023 (54% of all non-Manila transactions)

BusinessWorld – Cebu as the Top Outsourcing Destination BPO Demand Share: 75% of office leasing demand in Cebu came from outsourcing firms Prime Office Rents: ₱600 per sqm/month (half the cost of Makati/BGC)

Clark Office Market Trends Colliers Philippines – Pampanga Office Market Update (Q4 2024) Vacancy Rate: 31% in early 2024 (highest among PH cities) Available Office Stock: 164,000 sqm in Clark/Pampanga as of Q1 2024 Office Transactions: 3,000 sqm leased in Q1 2024

Philippine Daily Inquirer – Infrastructure & Decentralization Trends Clark’s Future Growth: Government projects (airport upgrades, road networks) expected to boost demand Clark’s Cost Advantage: Rents ~40-50% lower than Makati for similar Grade A offices

Flexible Workspace Market Growth KMC Solutions Internal Data (2024) KMC’s Occupancy Rate: 91% across its 27 locations (102,000 sqm, 20,000 workstations)

New Expansions: New sites in Clark, Cebu, and additional floors at One Ayala

BusinessWorld – PH Flexible Office Boom Hybrid Work Trend: 51% of Filipino employees prefer hybrid work models Corporates Downsizing: Large firms moving from 5-year traditional leases to shorter, scalable flex agreements URL: