Metro Manila’s retail sector is posting a measured post-pandemic recovery as mall vacancies continue to decline, although rising geopolitical tensions in the Middle East threaten to dampen consumer spending and delay a full rebound in the industry, according to property consultancy Colliers Philippines.

In its latest Metro Manila retail report published on Monday, May 25, Colliers Philippines research director Joey Roi Bondoc, senior analyst Martin Aguila, and research analyst Brent Respicio said vacancy in Metro Manila malls fell to 10.8 percent in the first quarter of 2026 from 11.4 percent in the third quarter of 2025, marking the lowest level since the first quarter of 2020.

The report said the Philippine retail market remains largely consumption-led, supported by overseas Filipinos’ (OFs) remittances and a young workforce employed in the information technology and business process management (IT-BPM) sector, even as rising oil prices and inflationary pressures weigh on discretionary spending.

“The Middle East tension is likely to temper the retail segment’s recovery. This is likely to drastically affect spending on luxury items as Filipinos, especially households relying on remittances, are expected to prioritize essentials,” Bondoc said.

Bondoc added that Colliers Philippines “doesn’t see the completion of sizable new retail supply as mall operators will continue seeing their sights on leasable space renovation and curation.”

Colliers noted that food and beverage (F&B) as well as clothing and footwear retailers remain the primary drivers of mall space take-up, accounting for the bulk of new retail activity across Metro Manila.

From the fourth quarter of 2025 to the first quarter of 2026, Colliers recorded the completion of 96,400 square meters (sqm) of new retail space, including The Plaza Bagong Silang in Caloocan City, The Shoppes at Park McKinley West and Park Triangle Mall in Fort Bonifacio, and Ayala Malls Arca South in Taguig City.

But new retail supply is expected to remain muted in the coming years as developers prioritize redevelopment and tenant curation over aggressive expansion.

Despite improving occupancy, Colliers said landlords are likely to remain cautious on rental escalation in 2026 as higher transport costs, elevated interest rates, and geopolitical uncertainties continue to weigh on discretionary spending and overall retail sentiment.

The property consultancy expects retail rents in Metro Manila to post flat growth this year even as vacancies continue easing, reflecting softer consumer demand and more deliberate spending behavior among shoppers.

The report said major developers are increasingly adopting “premiumization” strategies by introducing more curated and lifestyle-oriented retail formats designed to attract middle- to high-income consumers.

According to Colliers, foreign brands are also driving demand for larger retail spaces as companies expand flagship stores and experiential concepts.

The report also encouraged mall operators to focus on delivering a curated tenant mix, allocating space for foreign and experiential retailers, and integrating destination-led F&B concepts to sustain foot traffic.

Colliers added that mall operators and retailers should further strengthen omnichannel strategies by integrating physical stores with online platforms as consumers continue to adopt more cautious spending behavior amid geopolitical and economic uncertainties.