Understanding Occupancy Levels in Office Buildings

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The office sector in Metro Manila is showing signs of recovery in the first half of 2024, according to the latest report by Santos Knight Frank. 

This report highlights the upticks and tailwinds driving the property market towards resurgence. The rise in occupancy levels indicates that the market is rebounding from the pandemic. This recovery is driven by return-to-office mandates and the rise in business investments in the Philippines.

Occupancy vs. Vacancy

Occupancy

In real estate, occupancy represents the percentage of occupied or leased spaces within a property. This metric is the inverse of the vacancy rate and is used to gauge the utilization of available spaces.

Vacancy

Vacancy, on the other hand, refers to the percentage of all available spaces in a property that are unoccupied or not currently leased. It’s a metric that helps assess the demand for office spaces. 

A high vacancy rate suggests an oversupply or reduced demand, while a low vacancy rate typically points to strong market demand.

In real estate, vacancy and occupancy are directly correlated. Essentially, as occupancy levels rise, vacancy rates decrease, and vice versa. Understanding these metrics helps stakeholders make informed decisions about investments, leasing strategies, and market positioning. 

A simple calculation for occupancy rate can be done using the formula: 

Occupancy Rate = (Occupied Space / Total Leasable Space) x 100

Conversely, the vacancy rate can be derived as: 

Vacancy Rate = 100% – Occupancy Rate

The Vacancy Rate can also be computed independently as:

Vacancy Rate = (Available Space / Total Leasable Space) x 100

Office Vacancy in Metro Manila for 1H2024

In the first half of 2024, Metro Manila recorded an 18.9% vacancy rate, showcasing the current market dynamics. The year-to-date net absorption in Metro Manila stood at approximately 281,000 square meters, reflecting a remarkable 125% increase from the full-year net absorption recorded in 2023. 

This substantial growth results from the continued implementation of return-to-office mandates, along with sustained activity from the Information Technology and Business Process Management (IT-BPM) sectors. Moreover, government agencies have been significant contributors to office space demand in the first half of 2024. 

After slightly declining at the end of 2023 due to the addition of new supply, occupancy rates have been improving for the first half of 2024. This trend indicates a steady recovery and growing confidence in the office market.

Office Utilization in the Era of Hybrid

Nevertheless, while work-from-home (WFH) setups were instrumental in maintaining business continuity during the pandemic, the trend toward office utilization remains strong. 

A study revealed that 81% of occupiers intend to adopt an office-first hybrid strategy. This preference stems from the value they placed on collaboration and the benefits of face-to-face interactions, which are difficult to replicate in a remote setting. 

Offices provide a conducive environment for teamwork, networking, and spontaneous creativity, underscoring their importance in a post-pandemic world.

Likewise, occupancy levels in office buildings serve as a barometer for the broader economic climate and business sentiment. As the office sector in Metro Manila continues to evolve, understanding these dynamics is becoming increasingly important. This will be crucial for stakeholders navigating the resurging property market.

Looking for Office Space? We Can Help

Navigating the office space market can be challenging, but Santos Knight Frank is here to guide you every step of the way. Our dedicated Occupier Strategy and Solutions team specializes in handling all office brokerage transactions, ensuring you find the right space that meets your needs. 

Beyond brokerage, our Project Management experts are available to help tailor your office space to align with your company’s vision and requirements. 

Partner with Santos Knight Frank to make your office search seamless and efficient. Contact us today to learn more about our comprehensive services. Call/WhatsApp 0917 806 6315 or email inquiry@santos.knightfrank.ph today.

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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.