Office, residential rebound stalls amid Iran war
The uncertainties spawned by the ongoing Middle East conflict have stalled the recovery of the Philippine office and residential markets, which had been showing encouraging growth before the war started.
“Although office net demand is positive for the first quarter of 2026, rising geopolitical uncertainty and the ongoing energy crisis warrant close monitoring in the quarters ahead,” said Leechiu Property Consultants (LPC) director of commercial leasing Mikko Barranda on Tuesday, April 7.
The office market enters the second quarter supported by healthy net demand and a visible pipeline of prospective deals. However, Barranda said the escalating energy crisis and broader geopolitical tensions introduce downside risks that could slow deal conversions and weigh on occupier confidence.
For Metro Manila’s residential sector, LPC director of research, consultancy, and valuation Roy Golez said, “While first-quarter 2026 demand showed early signs of recovery, the sustainability of this uptick hinges on global stability, financing conditions, and buyer confidence.”
He noted that affordability constraints and elevated unsold inventory remain structural headwinds, and a more decisive recovery is unlikely until external risks moderate and rental yields begin to normalize relative to capital values.
The Philippine office market opened 2026 with 234,000 square meters (sqm) in gross demand for the first quarter, a 22-percent decrease quarter-on-quarter but consistent with typical first-quarter seasonal patterns.
Net demand reached 133,000 sqm, a 77-percent increase year-on-year, supported by a sharp decline in vacated spaces.
Elevated vacancy in select districts continues to drive landlord flexibility on rents, although this is expected to normalize as occupancy recovers. Bonifacio Global City (BGC) and Makati central business district (CBD), with single-digit vacancies and limited new supply, remain positioned for faster rental recovery.
The sector’s trajectory in the coming quarters will depend on the duration of external disruptions and the pace at which pipeline requirements convert to committed deals.
“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,” said Barranda.
Meanwhile, the Metro Manila residential property market recorded an uptick in demand during the first quarter of 2026, with take-up levels 19 percent higher than in the same period last year.
However, Golez said this increase reflects an early rebound rather than a sustained recovery, as affordability constraints and external risks continue to weigh on the market’s outlook.
Demand in the first quarter of 2026 was primarily driven by end-user purchases, supported by developer promotions and price incentives.
“Market activity points to some normalization of first-quarter demand patterns following the sharp slowdown in the prior quarter, rather than a broad-based shift in momentum,” he said.