The third quarter of 2026 tested the Philippine property market from every direction, as slower growth, stubborn inflation, higher interest rates and a weaker peso combined with the lingering fallout from the Iran conflict. Yet the quarter's story is less about retreat than about resilience under strain, with each sector finding its own way through, whether by genuine demand, by incentives or by betting on the long term.

Here's how that played out across office, residential, capital markets and tourism.

Office: demand rebounded, and one million sqm is in sight

Office leasing rebounded 33% in 3Q to 276,000 sqm, the strongest quarter of 2026, bringing year-to-date demand to 754,000 sqm. Net demand, which subtracts the space tenants gave back, has already reached 83% of last year's total, and most of the space in larger deals went to companies that are expanding rather than simply relocating. IT-BPM firms lead the pipeline of companies still looking for space, accounting for about half of its 416,000 sqm.

Space at the best addresses remains tight, with vacancy at 9% in BGC and 12% in Makati CBD, and rents in both districts moved higher. Metro Manila vacancy held at 18%, while most new supply is heading to markets that already have plenty of room. With roughly 246,000 sqm needed in 4Q, about what the market recorded in the same quarter last year, office demand is on track to reach one million sqm by year-end.

Residential: an assisted recovery

Metro Manila condo sales rose 17% in 3Q to 8,454 units, the highest quarterly total this year, led by ready-for-occupancy (RFO) units that buyers can move into right away. With developers also launching fewer units, unsold inventory eased to 80,000 units from a record 82,900, and months of supply, or how long it would take to sell everything at the current pace, fell to 28 from 34.

Much of this demand came from support by both the public and private sectors, as developers offered cash discounts of up to 60% on RFO units and new Pag-IBIG loan terms cut rates to 4.5%, fixed for three years, on loans of PHP 2.5 million to PHP 4.9 million. Rents and rental yields stayed mostly flat, and we remain cautious about whether demand can hold without these incentives.

Capital markets: squeezed for now, with reform on the horizon

GDP grew just 2.3% in 2Q, the weakest since the COVID pandemic. Inflation climbed back to 7.2% in September, the BSP raised its policy rate to 5% in its third hike, and the peso weakened to PHP 62.64 to the US dollar as of October 5, 2026, adding to construction costs. With prices sticky, rates unable to fall and incomes lagging, affordability remains a key constraint on transactions.

The bright spot is the proposed Condominium Redevelopment Act, which would replace the unanimous-vote requirement for redeveloping old condominium buildings with more practical approval thresholds based on a building's age. That matters most in Makati, home to 93% of the market's condominium buildings over 30 years old, where it could open the door to site aggregation and higher-value redevelopment.

Tourism: arrivals stalled, but developers keep building

Foreign arrivals reached 4.40 million from January to August, barely above last year, as higher airfares from the Iran conflict turned growth negative from May. China, up about 93%, was the clear bright spot, while South Korea, the second-largest source market, fell 22%, and full-year arrivals are now expected to land below 2025 levels.

Developers, however, haven't pulled back. Our 2026 Accommodation Pipeline Report, produced with the Philippine Hotel Owners Association, counts 45,884 hotel keys across 213 properties, about 70% of them in areas with direct international flights, while eastern Luzon is emerging as a potential new frontier thanks to its proximity to Metro Manila and improving infrastructure. We remain cautious, and for the industry to keep growing despite these setbacks, the government will need to match the conviction the private sector has already shown.

What to watch in 4Q 2026

• Whether office demand crosses one million sqm and large requirements convert into signed deals

• Whether condo demand holds as developer and government incentives continue

• Whether the BSP raises rates again and inflation begins to cool

• The progress of the Condominium Redevelopment Act

• Fuel costs, airfares and the pace of arrivals from China and India

Across all four sectors, opportunities remain, but they increasingly reward those who choose carefully where and when to commit.

Get the full story behind every sector in the 3Q 2026 Philippine Property Market Report, available at leechiu.com/market-insights.