OFFICE leasing transactions across the country dropped significantly, even as demand for flexible workspaces and green buildings rose. Meanwhile, vacancies have remained flat and unmoving.
That was the analysis of real estate advisory firm Colliers Philippines on the performance of the office market for the second quarter of this year, even as the property and real estate sectors continue to wrestle with the uncertainty arising from the ongoing Middle East crisis.
Office leasing transactions across Metro Manila and key provincial markets fell 24 percent year on year (YoY) in Q2, prompting Colliers to cut its 2026 forecast for office net take-up to 300K sqm net take-up from 400K sqm.
The slowdown was particularly pronounced outside Metro Manila, with Pampanga, Laguna, Iloilo, Bacolod, Cebu, and Davao collectively showing the worst-performing first half since 2022. Demand in these provincial markets plunged as much as 59 percent or 65K sqm vis-à-vis 159K sqm of recorded transactions in the first half of 2025.
"For the first six months of the year, the market slowed down, but it is not contracting,” Colliers Director and Head of Office Services-Tenant Representation Kevin Jara stressed at the firm’s virtual Q2 Philippine Property Market Briefing on July 30.
Jara said geopolitical events during Q2 2026 compelled occupiers to defer leasing decisions in anticipation of higher Capex outlay forecasts.
He said, “Some tenants preferred to renew their leases rather than acquire new ones. This tells us that occupiers are holding on to their leases rather than downsizing. That is a good indicator that the market is experiencing a slowdown rather than a real contraction.”
Despite the weaker leasing activity, office vacancy has remained flat at 19 percent across markets. The year-end forecast of 19.3 percent vacancy is “still going to be a positive takeoff," according to Jara.
While the effects of the Middle East crisis played out in the office market in Q2, Jara maintained that there were “pockets of opportunity in the flexible office space.”
For H1 2026, Colliers recorded 6,000 seats in net take-up in the flexible workspace industry — double that of the year prior.
“This is a very good indicator of organic growth for this sector,” said Jara, who also noted that “deals have gotten larger."
He said occupiers are choosing alternative office products such as the flexible workspace with plug-and-play facilities in the face of market volatility.
Alternative productsNotable deals in the flex workspace industry include global tech company KMC Solutions (650 seats), work.able GBF center (400 seats) and Spaces PNB (400 seats).
One milestone is Administrative Order (AO45), which was signed by President Ferdinand Marcos Jr. in July of this year. In lifting the moratorium on the IT office spaces accredited by the Philippine Economic Zone Authority (PEZA), it will boost office demand and “unlock more office options for occupiers," Jara said.
“AO45 is a meaningful policy shift. It opens up more available PEZA-accredited supply across all submarkets,” Jara said.
The Bay Area will potentially see an increase in PEZA supply of as much as 300K sqm.
Colliers reported increased demand for sustainable buildings, with green buildings accounting for 228K sqm, or 68 percent, of transactions in H1 2026.
"Sustainability is becoming an increasingly powerful demand driver,” Jara said. By 2030, Colliers expects 43 percent of Metro Manila’s office stock to be green-certified.
According to Jara, 1.1M sqm of green-certified pipeline will be added between 2026 and 2030.
Major property developers already have green building certifications and transitioned their office portfolio to renewable energy, with Megaworld, Ayala, and NEO already at 100 percent.
Looking ahead, Jara said infrastructure projects and the continued growth of third-party outsourcers (3POs) and GCCs (Global Capability Centers) will drive demand for office space.
Projects such as the Metro Manila Subway and MRT 7 and other transport hubs will be important considerations in office leasing decisions.
Jara added that lower energy costs, good governance, AI-readiness, and tax relief for MSMEs are potential enablers for the recovery of the office sector.
