Metro Manila’s office market showed early signs of resilience in the first quarter of 2026 despite lingering geopolitical and economic headwinds, with vacancy rates easing slightly amid steady leasing activity and the absence of new office supply, according to property consultancy Colliers.

In its Metro Manila office report for the first quarter of 2026, published on Tuesday, May 12, Colliers said overall office vacancy in the capital region declined to 19 percent during the first quarter from 19.4 percent in the fourth quarter of 2025.

Colliers Philippines director Joey Bondoc attributed the slight improvement to stable leasing activity, easing space surrenders, and the absence of new office completions during the quarter.

The property consultancy noted that office leasing remained resilient despite headwinds such as the flood-control controversy that emerged late last year, with traditional firms continuing to drive demand alongside expansions and new setups from information technology and business process management (IT-BPM) firms.

As of the first quarter, Metro Manila recorded 193,000 square meters (sqm) of office transactions, up 12 percent year-on-year. Fort Bonifacio led all submarkets with 40,000 sqm of transactions, followed by Makati City central business district (CBD) with 38,000 sqm.

Traditional occupiers—including legal, engineering, construction firms, government agencies, and flexible workspace operators—accounted for 67 percent of office transactions during the quarter, followed by third-party outsourcing firms at 23 percent, and shared services firms at 10 percent.

“Average sizes of deals have decreased across all tenant classes, indicating smaller deals are happening in the market,” Colliers said.

Meanwhile, provincial office markets posted weaker performance during the quarter, with office demand declining by 32 percent year-on-year to only 37,000 sqm. Iloilo overtook Cebu in office transactions due to limited inventory in Cebu’s major business parks.

Colliers expects about 505,000 sqm of new office supply to come online by the end of 2026, with Arca South, Bay Area, and Quezon City accounting for half of the upcoming developments.

Over the next four years, the consultancy expects more “controlled” levels of new office supply, averaging about 308,000 sqm annually.

Should office demand weaken further amid the continuing global crisis, Colliers said overall market vacancy could increase by two to three percent in the short to medium term. However, it noted that controlled supply levels are expected to cushion the impact on vacancies despite near-term demand headwinds.

Rental rates across Metro Manila remained largely stable during the quarter, although premium and grade A office rents in Makati CBD posted marginal quarter-on-quarter growth of 0.7 percent.

“The Philippine office market showed resilience in the first quarter, but uncertainty remains as the conflict in the Middle East continues. Waiting out the crisis is a risk in itself. Occupiers and landlords who act now—securing leases early, refurbishing aging assets and embracing flexible solutions—will be well-positioned to capture the upside as conditions improve,” said Kevin Jara, office services-tenant representation director at Colliers Philippines.

Colliers said landlords should consider refurbishing older office assets and modernizing building systems and sustainability features to remain competitive and future-proof properties against evolving workplace trends.

The consultancy also encouraged occupiers to adopt flexible workspace and operational expenditure (opex)-based office models to preserve capital and maintain agility amid continuing market uncertainty.

Colliers added that available Philippine Economic Zone Authority (PEZA)-accredited office inventory in Makati CBD, Fort Bonifacio, and Ortigas Center has fallen to a combined 478,000 sqm as of the first quarter, potentially limiting expansion options for IT-BPM occupiers in the coming years unless Administrative Order (AO) No. 18 is lifted or pending ecozone projects are proclaimed.