Philippine office market slows in Q2 2026 as Middle East crisis hits leasing decisions

The Philippine office market recorded 145,000 sq.m. of transactions in Q2 2026, a 24% quarter-on-quarter decline, as geopolitical uncertainty from the Middle East crisis prompted occupiers to defer leasing decisions. Colliers revised its full-year net take-up forecast to 300,000 sq.m. and year-end v

The Philippine office market's momentum stalled in the second quarter of 2026 as geopolitical uncertainty from the Middle East crisis prompted occupiers to reassess timing, costs and space commitments, according to Colliers. Metro Manila recorded 336,000 sq.m. of office transactions in the first half of 2026, with the second quarter accounting for 145,000 sq.m., a 24% quarter-on-quarter decline and one of the softer periods since 2024.

Colliers said the slowdown reflected deferred leasing decisions rather than a broad-based contraction, as space surrenders remained at normal levels and were still largely tied to natural lease expiries rather than major downsizing or cancellations. Leasing decisions were pushed to the latter part of the year, with occupiers prioritising renewals over relocations or expansions amid higher capital expenditure assumptions.

Primary central business districts continued to anchor demand. Makati CBD led Metro Manila with about 65,000 sq.m. of first-half transactions, followed by Fort Bonifacio at 63,000 sq.m. Mandaluyong posted the sharpest improvement at 47,000 sq.m., supported by a major pre-leasing transaction in an upcoming office development. Traditional occupiers remained the largest source of demand, followed by third-party outsourcing firms and global capability centres.

Outside Metro Manila, provincial office demand weakened substantially. First-half provincial transactions reached only 65,000 sq.m., down from 159,000 sq.m. a year earlier, marking the weakest first-half performance since 2022. Iloilo remained ahead with 22,000 sq.m. of transactions, followed by Cebu at 19,000 sq.m., with the latter still constrained by limited available inventory in Cebu IT Park and Cebu Business Park.

Metro Manila vacancy stood at 19% as of the first half of 2026, broadly stable from recent quarters and an improvement from 20% a year earlier. Colliers revised its full-year 2026 net take-up forecast to 300,000 sq.m. and its year-end vacancy forecast to 19.3%. No new completions were recorded in the first half, but about 434,000 sq.m. of new supply is expected in the second half, keeping pressure on landlords to differentiate through pricing, amenities and building accreditations.

Flexible workspace has become one of the market's clearest bright spots. Net take-up doubled year on year to about 6,000 seats in the first half of 2026, while Metro Manila's flex stock reached around 60,000 seats. Flexible workspace providers also accounted for a meaningful share of traditional occupier demand. Administrative Order No. 45, which exempts IT parks and IT centres in Metro Manila from the moratorium under AO No. 18, is expected to widen the pool of Philippine Economic Zone Authority-accredited options and support IT-BPM and global capability centre requirements.