--- title: "OPEX vs. CAPEX: The Real Financial Case for a Managed Office" description: How a managed office and a traditional lease differ in capex, opex, cash tied up, EBITDA, lease accounting and Philippine tax, with a worked example in pesos. image: https://blog.flyspaces.com/hubfs/flyspaces-landing-images/FlySpaces%20Philippines%20(35).jpg --- [![spacesasia-logo](https://blog.flyspaces.com/hs-fs/hubfs/SpacesAsia%20-%20June%202019/spacesasia-logo.png?width=260&name=spacesasia-logo.png "spacesasia-logo")](https://blog.flyspaces.com/) - [Home](https://flyspaces.com/) - Navigate - [Flexible Workspaces](https://blog.flyspaces.com/tag/flexible-workspaces#blog-nav) - [News and Events](https://blog.flyspaces.com/tag/news-and-events#blog-nav) - [Industry Insights](https://blog.flyspaces.com/tag/industry-insights#blog-nav) - [City Guide](https://blog.flyspaces.com/tag/city-guide#blog-nav) - [Case Studies](https://blog.flyspaces.com/tag/case-studies#blog-nav) - Connect - [Contact Us](https://flyspaces.com/contact-us) - [Subscribe](https://flyspaces.us14.list-manage.com/subscribe/post?u=0b15b0bb7a66ae626f3388eb9&id=f72d186210) - Share : 26 August 2026 [Listerlynn Joy Garingo - De La Serna](https://blog.flyspaces.com/author/joy-garingo-delaserna) # OPEX vs. CAPEX: The Real Financial Case for a Managed Office Most office quotes compare rent per square meter. A finance team needs a different comparison. It asks how much cash leaves in the first year, how much is spent on assets the company will not own, how the spend shows in the financial statements, and what it costs to leave early. Capex (capital expenditure) is spending that creates an asset used over several years, which is recorded on the balance sheet and depreciated. Opex (operating expenditure) is a cost recognized in the period it relates to. A traditional lease mixes both, and a managed office is built to turn most of it into opex. Whether that is cheaper depends on how long you stay, and this article gives you the arithmetic to test it. Amounts are in Philippine pesos (₱) with US dollars alongside at ₱62.7 per US dollar, the mid-market rate on 1 Oct 2026 per [Pluang](https://pluang.com/en/tools/currency-converter/usd-php). Rates move, so refresh them before you present a budget. Data is for Metro Manila. Cebu rents and fit-out costs differ, so request a Cebu quote if that is your location. ### Where the money goes in a traditional lease In a traditional lease you contract directly with the building owner, then build and furnish the space yourself. That work is called fit-out. The costs fall into three groups. Capex-type costs. Colliers told [BusinessWorld in Feb 2026](https://www.bworldonline.com/corporate/2026/02/02/727765/manila-office-tenants-favor-flexible-cost-efficient-spaces-colliers/) that fit-out in Metro Manila's central business districts typically costs ₱45,000 to ₱70,000 per sqm ($718 to $1,116). Colliers described fit-out, IT infrastructure and project management as the spending tenants have historically carried under longer leases. Check whether any figure you receive includes furniture and IT. Opex-type costs. These are rent, 12% value-added tax (VAT) on rent, and service charges, often called CUSA (common use service area) charges. Published asking rents for Grade A space, per an [Outsource Accelerator summary from Sep 2026](https://www.outsourceaccelerator.com/articles/how-much-rent-lease-office-space-manila-costs/), run about ₱850 to ₱1,000 per sqm per month in Makati, ₱800 to ₱1,200 in BGC and ₱500 to ₱950 in Ortigas. These are asking rents, not signed rents. In a [Sep 2025 Social Security System (SSS) tender](https://www.sss.gov.ph/wp-content/uploads/2025/09/TOR-FOR-THE-3-YEAR-LEASE-OF-OFFICE-SPACE-AT-SSS-MAKATI-BUILDING.pdf) for its Makati building, the minimum rent was ₱1,350 per sqm per month before VAT. Rent rose 5% a year from year two. Air conditioning and water were billed on top, at ₱258.74 and ₱57.99 per sqm in the first year. That tender is one landlord's terms, not a market average. Cash tied up. The same tender required a deposit of three months' rent and three months' advance rent, both VAT-inclusive. [A Philippine leasing guide](https://www.tripleiconsulting.com/how-rent-office-space-philippines/) describes two months of each as typical. A deposit is normally returned at the end of the lease, so it is not a cost. It is cash the company cannot use for the whole term. Two further features of a traditional lease matter to a finance team. The first is that what you build stays behind. In the SSS tender, improvements that could not be removed without damage passed to the owner with no payment. The Civil Code gives tenants some default rights, but [one legal commentary](https://www.respicio.ph/commentaries/tenant-improvement-reimbursement-after-lease-pre-termination-philippines) puts the reimbursement for useful improvements at half their value, and notes that leases often set their own formula. Plan on the fit-out being a sunk cost unless the contract says otherwise. The second is timing. Colliers called design, permitting, procurement and construction delays a major friction point for tenants in traditional leasing. In the SSS tender, the construction period counted inside the lease term, with at most one month rent-free. Rent can start before you can use the space. ### How a managed office changes the profile A managed office is a fitted, furnished private floor or suite that an operator runs for you. You pay one monthly fee, and the operator funds the fit-out and recovers it through that fee. For the tenant, the capex-type costs and most of the cash tied up either disappear or shrink, depending on the contract. Colliers' Feb 2026 report, quoted in the same BusinessWorld article, said multinational occupiers are increasingly focused on capital preservation, balance sheet flexibility and lower delivery risk, and that opex-led workspace solutions are gaining traction. It put occupiers' planning cycles at six to 18 months. Colliers' [Q2 2026 office report](https://www.colliers.com/en-ph/research/property-market-report-office-q2-2026-philippines) shows Metro Manila vacancy steady at 19%, leasing activity down 24% from the previous quarter, and flexible workspace demand growing. We found no verified average for managed office fees in Metro Manila. Operators price by floor, headcount and term, and few publish rates. That is why the next section works backward, from the traditional lease cost to the fee a managed office has to beat. ### A worked comparison This is an illustration, not a quote. It assumes 200 sqm in Makati at ₱1,000 per sqm per month, a 5% yearly rent increase, 12% VAT, and fit-out at the Colliers range of ₱45,000 to ₱70,000 per sqm. | Item (traditional lease, 3 years) | Amount | Calculation | | --- | --- | --- | | Fit-out, paid up front | ₱9,000,000 to ₱14,000,000 ($143,500 to $223,300) | 200 sqm × ₱45,000 to ₱70,000 | | Rent plus VAT, year 1 | ₱2,688,000 ($42,870) | 200 × ₱1,000 × 12 × 1.12 | | Rent plus VAT, year 2 | ₱2,822,400 ($45,010) | year 1 × 1.05 | | Rent plus VAT, year 3 | ₱2,963,520 ($47,270) | year 2 × 1.05 | | Total cash cost over 3 years | ₱17,473,920 to ₱22,473,920 ($278,700 to $358,400) | fit-out + rents above | | Deposit held until exit (2 to 3 months) | ₱400,000 to ₱600,000 ($6,380 to $9,570) | 2 to 3 × ₱200,000, refundable | The total excludes service charges, utilities, insurance and any restoration cost at exit. It also treats VAT as a cost, though a VAT-registered company may be able to credit it, so check with your tax adviser. Dividing the total by the months you stay gives the monthly figure a managed office quote has to beat. | Length of stay | Traditional lease, average per month | Per sqm per month | | --- | --- | --- | | 3 years | ₱485,400 to ₱624,300 ($7,740 to $9,960) | ₱2,427 to ₱3,121 ($38.7 to $49.8) | | 5 years | ₱397,500 to ₱480,900 ($6,340 to $7,670) | ₱1,988 to ₱2,404 ($31.7 to $38.3) | The 5-year row assumes the 5% yearly increase continues through year five. If a managed office quote for the same 200 sqm, VAT included, comes in below the figure for your expected stay, the managed office costs less in cash terms on these inputs. If it comes in above, the lease costs less. Because the traditional figure leaves out service charges and utilities, which a managed fee normally includes, the true gap favors the managed office slightly more than the table shows. Confirm the inclusions in writing. The table also shows why length of stay decides the answer. The fit-out is a fixed amount, and a longer stay spreads it over more months. ### The cost of cash that is tied up Fit-out and deposits take cash out of the business for the length of the lease. That has a cost even though it never appears as an expense. The formula is: Annual carrying cost = cash tied up × your cost of capital For example, ₱9,000,000 of fit-out at 10% is ₱900,000 a year ($14,350). The 10% is an assumption for arithmetic only, not a market rate. Use your own company's cost of capital or hurdle rate. Keep this figure separate from the cash comparison above, because it is an opportunity cost and not a payment. Adding the two together overstates the saving. ### How it shows in the financial statements Capex side. Fit-out the tenant pays for is recorded as an asset and depreciated. Under US GAAP, [ASC 842-20-35-12](https://finquery.com/blog/leasehold-improvements-accounting-amortization-us-gaap/) calls for amortization over the shorter of useful life and remaining lease term. Under IFRS, an [IFRS Interpretations Committee agenda decision from 2019](https://www.ifrs.org/content/dam/ifrs/meetings/2019/november/ifric/ap4-ifrs-16-lease-term-and-useful-life-of-leasehold-improvements.pdf) treats the lease term as a consideration in setting the useful life of non-removable improvements, not a hard cap. In both cases, the fit-out leaves the balance sheet over a few years and does not come back. The lease itself. Under [IFRS 16](https://www.ifrs.org/content/dam/ifrs/publications/html-standards/english/2025/issued/ifrs16.html), most office leases appear as a right-of-use asset and a lease liability. [FASB's Topic 842](https://storage.fasb.org/ASU%202016-02_Section%20A.pdf) also puts operating leases on the balance sheet, though [its summary of the standard](https://storage.fasb.org/FIF%20ASU%202016-02%20Leases%20%28Topic%20842%29%20%28Rev%206-3-20%29.pdf) shows operating leases keep a single lease expense. Philippine companies apply PFRS 16, the local version of IFRS 16, [effective since 1 Jan 2019](https://www.pwc.com/ph/en/tax/tax-publications/taxwise-or-otherwise/2019-taxwise-or-otherwise/tax-implications-of-pfrs-16-leases.html). A Philippine subsidiary reports under PFRS 16, and its foreign parent reports under whichever standard applies at home. EBITDA and covenants. This is where the common assumption needs correcting. The IASB's [effects analysis for IFRS 16](https://www.ifrs.org/content/dam/ifrs/project/leases/ifrs/published-documents/ifrs16-effects-analysis.pdf) expects EBITDA to rise under IFRS 16, because EBITDA excludes the depreciation and interest that replace the rent expense. Law firm Osler's [review of covenant effects](https://www.osler.com/en/insights/updates/the-impact-of-ifrs-16-on-bond-and-loan-covenants-five-years-out/) adds that lease liabilities increase debt, and that leverage usually rises because debt grows by a larger percentage than EBITDA. A managed office fee that is a service contract behaves differently. It sits in operating expenses above EBITDA, so it lowers EBITDA compared with a capitalized lease of the same cost, while adding no lease liability. Whether that helps depends on the covenant. A debt-to-equity test benefits from no liability. An EBITDA-based test may not. Read your loan agreement's definitions before assuming either way. Is a managed office a service or a lease? The answer depends on the contract. A contract is a lease only if the customer controls an identified asset, and [BDO notes](https://www.bdo.com.au/en-au/content/accounting-news/accounting-news-july-2018/when-is-a-lease-not-a-lease) that a physically distinct floor can be one. If the operator has a substantive right to substitute the space throughout the term, there is no identified asset. That is a judgment call, as the [IFRS Interpretations Committee's discussion of substitution rights](https://www.ifrs.org/projects/completed-projects/2023/definition-of-a-lease-substitution-rights-ifrs-16/tentative-agenda-decision-and-comment-letters/) shows. A dedicated floor with a long fixed term and a substitution clause that is never used is likely to be treated as a lease. Ask your auditor to review the draft contract before you rely on any off-balance-sheet treatment. ### Philippine tax points The BIR's [Revenue Memorandum Circular 11-2024](https://bir-cdn.bir.gov.ph/BIR/pdf/RMC%20No.%2011-2024%20Final.pdf), issued 22 Jan 2024, sets out how PFRS 16 leases are taxed. Its main points for a tenant are these. - Only rent actually paid or incurred is deductible for income tax. The depreciation and interest PFRS 16 records are not. - A security deposit is recorded as an asset. It becomes deductible only if the landlord keeps it under the contract. - Input VAT on rent is creditable only when the rent is paid. - Rent is subject to 5% expanded withholding tax, computed on actual rent. - Lease agreements are subject to documentary stamp tax. - Dismantling and restoration costs are deductible only when actually paid or incurred. How the BIR treats a managed office fee, and how fit-out is depreciated for tax, are separate questions that this circular does not settle. Have a Philippine tax adviser confirm both in writing before you sign. This article is general information and not tax or accounting advice. ### Where the managed office does not win The comparison above shows a managed office winning on short stays and losing on long ones. Other cases favor a traditional lease. A long stay with stable headcount spreads the fit-out over enough months that the lease is usually cheaper per month. A company that needs control over layout, branding or security may find an operator's standard floor too limiting. A large occupier may find that the operator's floor sizes do not fit. Colliers reported in the BusinessWorld article that third-party operators and government tenants occupy about 1,500 sqm on average, roughly a full floor. The operator's contract may also limit what you can change or how quickly you can leave. Landlords with space to fill sometimes offer rent-free months or a fit-out allowance, and with vacancy near 19% in Q2 2026 it is reasonable to ask. Any concession you win lowers the traditional figure in the table. ### A sequence for the decision 1. Fix your expected stay and a likely range of headcount. 2. Get a traditional quote with all charges and a fit-out estimate from a contractor or landlord, and compute the monthly figure for your stay. 3. Get written managed office quotes from more than one operator, for the same area and term, with VAT shown. 4. Compare the quotes to the traditional monthly figure. Price the tied-up cash separately. 5. Send both draft contracts to your auditor and tax adviser before you decide. Ask every landlord and operator the same questions. What is the total monthly cost with VAT and charges? When does rent start? How much cash is due at signing, and when is the deposit returned? How much is the yearly increase? What does leaving early cost? Who owns the fit-out and furniture at the end? Can the space grow or shrink? For a managed office, can the operator move you to another space? FlySpaces arranges viewings and compares managed offices and traditional spaces in Metro Manila and Cebu on the same terms. Send us your headcount, target district and expected stay, and we will set out the comparison with you. Tags: [Flexible Office Space](https://blog.flyspaces.com/tag/flexible-office-space) ![](https://blog.flyspaces.com/hubfs/SpacesAsia%20-%20June%202019/author-img.png) ##### [Listerlynn Joy Garingo - De La Serna](https://blog.flyspaces.com/author/joy-garingo-delaserna) Joy Garingo - De La Serna is a Filipino business executive specializing in the real estate, flexible workspace, and Employer of Record (EOR) sectors within the Asia-Pacific (APAC) region. She is involved in creative ventures and community-centric workspace environments that support local startups, founders, and generational shifts in hybrid work styles. 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