Despite war, rising interest rates and stubborn inflation, the Philippine office market regained its footing in the third quarter of 2026. Office leasing rose 33% from the previous quarter, and most of the space in larger deals went to companies that are expanding. Makati led all districts, while limited space in BGC and Makati CBD pushed rents there higher. With 416,000 sqm of deals still in progress, about half of them from IT-BPM firms, leasing for 2026 is within reach of one million sqm.

Companies leased 754,000 sqm of office space in the Philippines in the first nine months of 2026. This figure, called gross demand, is the total amount of space signed for across the country. In the third quarter (3Q) alone, companies leased 276,000 sqm. That is 33% more than in the second quarter (2Q) and the highest of any quarter this year.

This growth came even though the challenges from the first half of the year had not gone away:

The ongoing conflict between the US and Iran
Higher interest rates, with the Bangko Sentral ng Pilipinas (BSP) raising its policy rate to 5%
Rising prices, with inflation reaching 7.2% in September

Companies kept leasing anyway. Net demand, which subtracts the space tenants gave up, reached 376,000 sqm. That is already 83% of the total for all of 2025. Most of the space in larger deals went to companies that are expanding, and some firms have already signed for space in buildings still under construction. On top of that, companies are now negotiating for another 416,000 sqm.

In the first half, we said demand had slowed down but not stopped. In 3Q, it picked up speed again. The big question now is whether the fourth quarter can push total leasing for 2026 past one million sqm.

Office leasing bounced back in the third quarter

Companies leased 276,000 sqm in 3Q, compared with 208,000 sqm in 2Q and 270,000 sqm in 1Q. That is also slightly more than the 255,000 sqm leased in 3Q 2025.

So far this year, leasing totals 754,000 sqm. That is 62% of last year's full-year total of 1.22 million sqm, and about 23% lower than the same nine months of 2025. The gap is closing, though. At midyear, leasing was about a third behind last year. Now it is less than a quarter behind.

Traditional companies leased the most space at 325,000 sqm, or 43% of the total. These are businesses outside the outsourcing industry, such as banks, insurers, property developers and professional services firms.

Next came IT-BPM firms at 268,000 sqm, or 36%. Most of that went to outsourcing companies that serve other businesses (214,000 sqm). The rest went to Global Capability Centers, or GCCs (54,000 sqm). These are offices that multinational companies set up and run themselves.

Managed facilities took 105,000 sqm (14%), and government agencies 56,000 sqm (7%).

Managed facilities are worth a closer look. These are ready-to-use offices that an operator fits out and manages, usually on more flexible lease terms. Most of the companies using them are IT-BPM firms, so the outsourcing industry's actual share of leasing is bigger than 36%. It also shows that companies are choosing flexibility to reduce their risk.

Net demand has already reached 83% of last year's total

Net demand is the space companies leased minus the space they gave back. It shows how much the market actually grew. From January to September, net demand reached 376,000 sqm. For comparison, it was 455,000 sqm for all of 2025 and 422,000 sqm for all of 2024.

More tenants did give up space this quarter. They vacated 171,000 sqm in 3Q, up from 116,000 sqm in 2Q. That brings the total so far this year to 378,000 sqm.

However, the reason they left is important. Most moved out to upgrade, leaving older buildings for newer, better ones. This is known as a flight to quality. In these cases, the company is not leaving the market. It is simply moving to a better building.

Expansions and early commitments show long-term confidence

For deals of 1,000 sqm or more, this is why companies took space:

Expanding: 363,000 sqm (65%)
Relocating: 131,000 sqm
Opening a new site: 35,000 sqm
Relocating and expanding at the same time: 31,000 sqm

In short, most companies are not just moving. They are growing.

About 60,000 sqm, or 8% of this year's leasing, came from pre-commitments. These are leases signed for buildings that are still under construction and will be finished in 2028. IT-BPM firms signed for almost all of it, about 58,000 sqm. Companies that commit to space two years in advance are confident about the future.

PEZA-accredited buildings accounted for 513,000 sqm, or 68% of leasing. These buildings are registered with the Philippine Economic Zone Authority (PEZA), and companies need to be in one to qualify for certain tax incentives. More of these buildings may soon be available. Administrative Order (A.O.) 45 now allows new economic zones in Metro Manila, which is expected to support future leasing.

Metro Manila anchored demand, and Makati led it again

Metro Manila accounted for 618,000 sqm, or 82% of national take-up.

Makati City led every district with 141,000 sqm, or 23% of Metro Manila demand. The Bay Area moved up to second at 111,000 sqm, followed by Quezon City (92,000 sqm) and BGC (89,000 sqm). Alabang and Ortigas Center each recorded 56,000 sqm, and Mandaluyong City 54,000 sqm.

BGC's fourth-place finish is a supply story, not a demand story. With vacancy at 9%, there is simply not enough available space to lease. Makati stands to benefit, as tenants priced or crowded out of BGC look next door.

Cebu remained the leading provincial hub

Provincial markets contributed 136,000 sqm, or 18% of national take-up.

Cebu led at 55,000 sqm, accounting for 40% of provincial demand on its own. Clark followed at 26,000 sqm, then Iloilo (25,000 sqm) and Laguna (7,000 sqm).

The pipeline keeps growing, and IT-BPM leads it

The live requirements pipeline, meaning deals actively being worked on but not yet signed, stands at 416,000 sqm. That is up from 353,000 sqm at the half. Metro Manila accounts for 363,000 sqm (87%) and the provinces 53,000 sqm (13%).

Its composition:

IT-BPM: 206,000 sqm, about half the pipeline, split between third-party outsourcers (108,000 sqm) and GCCs (98,000 sqm)
Traditional occupiers: 137,000 sqm
Government: 73,000 sqm

GCCs are offshore offices that multinationals build and staff themselves, typically for higher-value functions. They account for just 54,000 sqm of this year's closed deals but 98,000 sqm of the live pipeline. Their biggest contribution may still be ahead.

Seventeen live requirements exceed 5,000 sqm, and 12 of them come from IT-BPM. The appetite for large space is real, and it is concentrated in outsourcing. IT-BPM is expected to remain the largest demand driver for the rest of 2026 and into 2027.

Vacancy steady at 18%, with new supply headed away from the prime CBDs

Metro Manila's vacancy rate held at 18%, or 2.7 million sqm of available space. BGC remained the tightest at 9%, followed by Makati CBD at 12% and Ortigas Center at 15%. At the other end, Mandaluyong City (28%), Taguig City (25%) and the Bay Area (24%) have the most room.

Pipeline supply totals 659,000 sqm through 2028, led by Quezon City (200,000 sqm), the Bay Area (172,000 sqm) and Mandaluyong City (161,000 sqm). More than 80% of new space is going to three markets where vacancy is already 20% or higher.

The prime districts get very little. No new buildings are scheduled to enter Taguig City or Ortigas Center until after 2028. Makati CBD adds just one 10,000 sqm building in 2027, and BGC about 68,000 sqm over the next two years.

In the provinces, vacancy stood at 19%, with Davao the tightest at just 4%. Cebu is set to add 174,000 sqm of new supply over the next three years.

Rents rose where space is scarcest

Transacted rents for bare and warm shell requirements of 1,000 to 3,000 sqm moved up in the two tightest districts:

BGC: PHP 1,000 to PHP 1,200 per sqm, up from PHP 900 to PHP 1,100 in 1H
Makati CBD: PHP 750 to PHP 1,100 per sqm, up from PHP 650 to PHP 900
Ortigas Center: PHP 600 to PHP 750 per sqm, unchanged

Higher-vacancy markets stayed lower priced, from PHP 500 to PHP 750 in Quezon City to PHP 400 to PHP 700 in the Bay Area and PHP 400 to PHP 550 in Alabang. The low end of BGC's range is now nearly double the high end of Alabang's. For occupiers with flexibility on location, that gap is leverage.

Industry insight

"While the headwinds this year are real and persistent, occupiers have largely adapted to the situation and continued to take space. We see that in third quarter demand reaching 276,000 sqm. We also see this year that the market is inclined towards PEZA-registered buildings. We look forward to seeing how the lifting of the ecozone moratorium under AO 45 opens that market to new buildings." — Marco De Padua, Senior Manager of Commercial Leasing

Market outlook: what to watch in 4Q 2026

The office market enters the final quarter with a 416,000 sqm pipeline, a 33% quarterly rebound in take-up, and net demand already at 83% of last year's total.

The one-million-sqm mark is within reach. At 754,000 sqm year-to-date, gross demand needs roughly 246,000 sqm in 4Q to get there. That is about what the market recorded in 4Q 2025 (245,000 sqm), and less than it delivered in 3Q 2026.

IT-BPM, led by third-party outsourcers and GCCs, is expected to remain the largest demand driver through the rest of 2026 and into 2027. Pre-commitments and the lifting of the ecozone moratorium under A.O. 45 add support.

On the supply side, the picture still favors landlords at the best addresses. With BGC vacancy at 9% and no new buildings entering Taguig City and Ortigas Center until after 2028, prime districts remain positioned for firm rents. Higher-vacancy markets will continue to favor tenants.

The macro backdrop has not eased. Inflation remains well above the BSP's 3% target, and markets expect another rate hike. Ultimately, the pace of recovery will hinge on how quickly live requirements convert into committed deals.

Stay ahead of the shifts shaping the Philippine office market. Access the latest insights and download the full 3Q 2026 Philippine Property Market Report at leechiu.com/market-insights.