METRO Manila’s office market improved in the first three months of the year, global real estate services firm Cushman & Wakefield (C&W) said on Tuesday.
According to its latest Philippine MarketBeat report, office demand logged 62,000 sqm of net take-up across Prime and Grade “A” spaces, as vacancy rates across the capital eased to 17.1 percent from 17.9 in Q4 2025.
“Expanding IT-BPM (information technology-business process management) and shared services sectors drove this growth,” the report said.
Leasing concentrated in Makati CBD and BGC, as tenants actively pursued flight-to-quality (from Class B/C to Class A locations) strategies.
However, average headline rents softened to P959 per square meter monthly, as landlords in high-vacancy submarkets offered more competitive pricing.
Vacancy levels in core central business districts (CBDs) held at around 10 percent, while decentralized markets had more vacancies at 24.4 percent.
“Global business sentiment remains cautious amid the ongoing Middle East crisis, prompting firms to expand flexible work arrangements and delaying leasing decisions, which may soften office space net absorption over the next three to six months,” said C&W director and head of Research, Consulting and Advisory Services Claro Cordero Jr.
“This is likely to extend leasing timelines, but we expect this to change as soon as the Middle East [crisis] improves,” said C&W country head Dom Frederick Andaya.
The market is being reshaped by the rising adoption to artificial intelligence-augmented workflows, particularly in the IT-BPM sector, and a growing demand for energy-efficient or green offices, Cordero noted.
Meanwhile, the industrial market continued to post strong fundamentals, with national vacancy rate remaining at 4.2 percent across 9,000 hectares of industrial estate inventory.
The Cavite, Laguna and Batangas (Calaba) region showed tight conditions, with vacancy in Batangas at 1.7 percent, Laguna at 3.6 percent, and Cavite at 5 percent.
Demand was supported by logistics, cold storage, semiconductors, and other occupiers preferring internationally competitive facilities in Central Luzon, Cebu, and Northern Mindanao.
“Industrial assets in the Philippines offer superior investment yields, surpassing office yields, due to limited zoned land and sustained demand from logistics and manufacturing occupiers. These properties deliver resilient cash flows and serve as a hedge against market volatility, attracting increased capital allocations from investors,” Cordero said.
The report, however, mentioned a more challenging economic backdrop, citing that the International Monetary Fund lowered its 2026 Philippine growth forecast to 4.1 percent from 5.6, while the peso weakened to 60.74 against the US dollar in March.
With inflation expected to exceed the central bank’s target range, average office yields declined to 6.70 percent during the quarter.
“Cash has emerged as the most valuable asset, compelling developers to prioritize liquidity and safeguard balance sheet strength,” Cordero said.
The hotel sector will recalibrate toward domestic tourism due to rising aviation fuel costs, as higher long-haul airfares pressure international arrivals, the report said.
Demand in the residential sector is expected to remain cautious amid persistent oversupply of mid-end condominium units in Metro Manila and weaker buyer sentiment, the report noted.
For retail, consumers will prioritize necessity spending in response to inflation and elevated utility costs.
