The Philippine property market entered 2026 showing genuine signs of recovery. Office net demand posted strong gains, residential take-up improved, and tourism arrivals ticked upward. But just as momentum was building, a new crisis emerged. The Iran conflict and the closure of the Strait of Hormuz now pose the most immediate risk to the country's economic trajectory since the pandemic, reshaping the outlook across every sector.

Here's what the data is telling us.

On Track or Off Course? Office Demand Holds as Global Headwinds Test Momentum

The office market posted solid 1Q numbers. Gross demand reached 234,000 sqm, with traditional occupiers leading at 61% of take-up and IT-BPM contributing 34%. Net demand increased 77% year-on-year to 133,000 sqm, driven largely by the absence of POGO-related exits that had weighed on prior quarters.

Makati City was the standout performer, capturing 76,800 sqm in transactions, equivalent to more than half of its total 2025 demand in just one quarter. BGC continues to post the tightest vacancy at 8%, while the Metro Manila average sits at 18%. A pipeline of 227,000 sqm in active requirements signals sustained occupier interest, but the key question is whether these convert to committed deals amid current uncertainties.

"At this point, the market remains on track, but the path forward is becoming less straightforward. Tenants are becoming more discerning and intentional in their real estate decisions, which must be matched by greater flexibility from the market. While the demand pipeline remains healthy, the key risk lies in conversion, as to whether these requirements can translate into actual transactions amid current uncertainties. This is something we will need to monitor closely in the coming months."
— Mikko Barranda, Director of Commercial Leasing

Residential Market Shows Early Uptick, but Outlook Remains Cautious

Metro Manila residential demand rose to 7,732 units in 1Q 2026, a 19% increase year-on-year. The uptick was largely driven by end-users responding to developer promotions and price incentives, rather than a broad shift in market momentum. Speculative investor interest remains subdued due to compressed rental yields, currently at 3.8% for primary units and 4.6% for secondary.

Unsold inventory remains elevated at 31 months of supply, and a full recovery will require external risks to moderate and rental yields to normalize relative to capital values.

"Given heightened global and geopolitical risks, market participants should maintain a cautious stance—closely assessing supply-chain impacts, preserving liquidity, and deferring aggressive expansion until conditions stabilize. The direction of the market in the coming quarters will depend heavily on global stability, financing conditions, and buyer confidence."
— Roy Golez, Director of Research, Consultancy, and Valuation

Running Out of Gas: Six Crises in Six Years, but Structural Fundamentals Remain Sound

Since 2019, Philippine real estate has endured six consecutive external and domestic shocks: COVID-19, the Ukraine war and inflation spike, the POGO ban, Trump tariffs, the flood control scandal, and now the Iran war. The cumulative toll is visible in the numbers. The PSEi is down 23% from its 2019 level, GDP growth slowed to 4.4% in 2025, and the BSP's Residential Real Estate Price Index has decelerated to just 1.9% growth, essentially flat after inflation.

What makes the Iran crisis different is its breadth. It physically disrupts the oil supply line (the Philippines imports 98% of its fuel), it hits every consumer through surging fuel and electricity costs, and it undermines the BSP's ability to continue its easing cycle just when rate cuts were finally gaining traction.

Despite the turbulence, four structural advantages keep the Philippine market compelling. Prices have held firm: the BSP RPPI is up 51% cumulatively since 2019, the strongest in the region, even as China (-17%) and Indonesia (-7%) saw declines. The market is overwhelmingly locally owned, with 95% of residential transactions involving domestic buyers, creating a natural price floor. The Philippines has Asia's youngest population with a median age of 26.6, meaning housing demand has a 40-year demographic runway. And the consumption engine, anchored by USD 35.6 billion in OFW remittances and 4.6% household consumption growth, remains fundamentally sound even if the oil shock poses near-term risks.

Industrial and retail have been the consistent outperformers through all six crises. Industrial rents are up 45% since 2019 with yields of 7–8%, making it the only real estate sector where returns consistently cover borrowing costs. The retail sector continues to show resilience, with the top three developers posting PHP 61.1 billion in 1H 2025 revenue, up 7.5% year-on-year. For investors, the current environment presents a window to lock in financing at the BSP's current 4.25% policy rate before potential hikes later this year. Prime CBD locations in BGC, Makati, and Ortigas, where vacancy is tightest and recovery most advanced, offer the strongest near-term positioning.

"The market is running out of gas, but the engine is sound. The fundamentals that made 2019 a great year are still here, just buried under six layers of crisis. Smart capital positions now."
— Tam Angel, Director of Investment Sales

Challenging Path Ahead: Energy Crisis Threatens to Derail Tourism's Early 2026 Gains

International arrivals grew 3.09% year-on-year in the first two months of 2026, reaching 1.32 million visitors. Long-haul markets led the charge, with the U.S., Canada, Australia, and the U.K. all posting healthy gains. Taiwan was the short-haul bright spot with 35.7% growth.

But the energy crisis has fundamentally altered the outlook. Jet fuel costs have doubled, long-haul airfares are up 25–50%, and 80% of surveyed hotels report occupancy declines already underway or expected by April. The corporate and MICE segment faces the steepest impact.

"Philippine hotels are entering their most challenging period since the pandemic. Occupancy is expected to fall sharply in April and May as the fuel crisis drives up airfares, dampens traveler confidence, and squeezes household budgets. With international arrivals under threat and domestic spending softening, the industry is bracing for a difficult second half of the year, and the outlook beyond that depends entirely on how quickly the Hormuz crisis resolves."
— Alfred Lay, Director of Hotels, Tourism, and Leisure

The Bottom Line

The market has been working its way back since 2019, and the 1Q 2026 data shows the recovery gaining traction. But it remains fragile, and the Iran oil shock risks reigniting inflation just as monetary easing was gaining ground. The fundamentals are intact, but the direction of the market in the coming quarters will depend heavily on global stability, financing conditions, and how quickly external disruptions resolve.

Download our full 1Q 2026 Philippine Property Market Report at leechiu.com/market-insights.