The Philippine office market recorded 488,000 sqm in gross demand for the first half of 2026, meaning the total volume of space leased across the country. Demand softened in 2Q as some occupiers adopted a wait-and-see approach amid heightened market uncertainty, driven by the following factors:

Geopolitical uncertainty tied to the ongoing US-Iran conflict
Higher construction and energy costs
The 90% work-from-home policy now available to PEZA-registered locators

That is only half the picture, though. Net demand still came in at 293,000 sqm, cushioned by lower terminations. Companies simply stopped handing space back, with vacated spaces down 57% year-on-year. Meanwhile, the live requirements pipeline, meaning deals actively being worked on but not yet signed, stands at 353,000 sqm, led by IT-BPM at 155,000 sqm. Twenty of those requirements are larger than 5,000 sqm.

Read together, the numbers point to one conclusion: the large transactions have not gone away. They are waiting for conditions to clear.

Gross demand softened, and traditional occupiers pulled back hardest

Office take-up for 1H 2026 reached 488,000 sqm, down 32% year-on-year. The pullback was broad, but it was not evenly distributed.

Between the first and second quarters, traditional occupiers cut quarterly take-up by 29%, from 181,000 sqm to 128,000 sqm. These are the non-outsourcing tenants: banks, insurers, developers, professional services firms. IT-BPM demand, by contrast, dipped a more modest 10%, from 94,000 sqm to 85,000 sqm.

Deal-making also skewed small. Of the 132 transactions closed in the half, only nine exceeded 5,000 sqm. Occupiers are still willing to transact. They are just not willing to commit to size.

Net demand held up because tenants stopped leaving

Net demand is gross take-up less the space tenants gave back. It reached 293,000 sqm in 1H 2026.

The reason it stayed comfortably positive sits on the other side of the ledger. Vacated spaces fell to 195,000 sqm, a 57% decline from the 454,000 sqm returned in 1H 2025. Occupiers have largely completed their right-sizing, and in an uncertain environment, most chose to retain the space they have rather than downsize further.

Fewer exits cushioned the softer take-up and kept net demand positive.

Metro Manila anchored demand, and Makati led it

Metro Manila accounted for 83% of national take-up, or 404,000 sqm.

Makati City led every district with 106,000 sqm, equivalent to 138% of its 1H 2025 level. Put another way, Makati grew nearly 40% year-on-year while the national market shrank by roughly a third.

Mandaluyong's entry into the top five is worth noting on its own. It suggests demand is broadening beyond the traditional CBD core.

Provincial demand stayed concentrated, but subdued

Provincial markets contributed 84,000 sqm, or 17% of the total, at just 53% of their 1H 2025 level. In other words, provincial take-up nearly halved, largely reflecting less IT-BPM activity outside the capital.

Cebu remained the leading provincial hub at 31,100 sqm, followed by Iloilo (21,700 sqm) and Clark (19,900 sqm).

The pipeline says demand is deferred, not lost

This is the number that reframes the half. The active requirements pipeline stands at 353,000 sqm, and its composition matters:

IT-BPM: 155,000 sqm (44%), with Global Capability Centers accounting for the majority at 88,000 sqm, versus 67,000 sqm for third-party outsourcers
Traditional occupiers: 128,000 sqm (36%)
Government: 70,000 sqm (20%)

Global Capability Centers, or GCCs, are offshore offices that multinationals build and staff themselves rather than outsourcing to a third-party provider, typically for higher-value functions. They are now the single biggest engine in the pipeline.

Crucially, requirements above 5,000 sqm are more prevalent in the pipeline than in actual 1H 2026 transactions. The appetite for large space exists. It simply has not converted yet.

Large blocks are scarce exactly where tenants want them

An LPC case study on buildings offering 5,000 sqm or more of contiguous space revealed a supply-demand mismatch for large occupiers. Contiguous space means a single unbroken block, typically whole or adjacent floors, rather than space scattered across a building.

BGC, the preferred address for sizable requirements, offers the least: only five qualifying buildings, totaling 43,000 sqm. Makati City has 14 such buildings, though only three sit within the CBD. The deepest inventory of large, ready-to-occupy blocks sits in the Bay Area (29 buildings) and Quezon City (22 buildings), which is not where most large tenants are looking.

For PEZA-accredited requirements, the options narrow further still, particularly in BGC. These are spaces in buildings registered with the Philippine Economic Zone Authority, which qualified locators need in order to access fiscal incentives. In BGC, demand from IT-BPM firms, led by GCCs, continues to outpace the supply of large, contiguous office space.

Vacancy steady at 18%, with almost nothing new coming to the prime CBDs

Metro Manila's vacancy rate held at 18%. BGC posted the tightest availability at 8%, followed by Makati CBD at 13%.

Pipeline supply totals 740,000 sqm through 2028, led by Quezon City (200,000 sqm) and Mandaluyong City (122,000 sqm). Notably, no new buildings are scheduled to enter the Makati CBD and Ortigas Center markets until after 2028, reinforcing the scarcity of prime space.

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 held firm where space is scarce, and softened where it's not

Transacted rents for requirements of 1,000 to 3,000 sqm were broadly stable across the prime districts:

The exception was the higher-vacancy fringe markets. In Quezon City and Alabang, rents softened as landlords stayed flexible to secure tenants.

Industry insight

"This is more of a pause than a pullback. Companies remain committed to growth, and as businesses adapt to the evolving geopolitical environment, real estate decisions are expected to gain momentum in the second half of the year.
Global Capability Centers continue to be the strongest driver of office demand. They account for the majority of active IT-BPM requirements and reinforce the Philippines' position as a strategic hub for high-value global operations. The Philippines is still in the early stages of the GCC growth story. India has over 2,000 Global Capability Centers, while the Philippines has only around 200. That gap represents a significant long-term opportunity as more companies establish higher-value functions in the country."
— Mikko Barranda, Director of Commercial Leasing at Leechiu Property Consultants

Market outlook: what to watch in 2H 2026

The office market enters the second half of 2026 with a healthy 353,000 sqm pipeline but a cautious occupier base.

IT-BPM, led by Global Capability Centers, and the government sector are expected to be the primary demand drivers. The re-emergence of larger requirements offers upside, should geopolitical and economic conditions clarify.

On the supply side, the picture favors landlords in the best addresses. With no new supply entering the Makati CBD and Ortigas markets until after 2028, and BGC vacancy at just 8%, prime districts remain positioned for rental stability. Higher-vacancy markets, meanwhile, will continue to favor tenants, and occupiers with flexibility on location have leverage worth using.

Ultimately, the pace of recovery will hinge on how quickly deferred requirements convert into committed deals in 2H 2026.

Stay ahead of the shifts shaping the Philippine office market. Access the latest insights and download the full 1H 2026 Philippine Property Market Report at leechiu.com/market-insights.