Artificial intelligence (AI) is throwing a brief wrench into the Philippine office market, forcing companies to pause leasing decisions as they re-evaluate their long-term footprint, according to real estate consultancy Jones Lang LaSalle (JLL) Philippines Inc.

In a briefing on Thursday, July 30, Joey Radovan, JLL Philippines country head, said commercial space take-up cooled significantly during the second quarter as businesses paused to figure out whether machine learning algorithms will shrink their desk requirements or simply optimize operations.

“Whether [AI’s] going to translate into smaller space or a more optimized space. I think there's an increasing role of AI in terms of shaping decisions now compared to before,” Radovan said.

Leasing demand tumbled by 50 percent from the previous quarter to 145,000 square meters between April and June, while tenants vacated 125,000 square meters during the same period.

Facing market uncertainty, companies increasingly shunned traditional long-term leases in favor of flexible, agile spaces.

Yet property analysts argued the sudden deceleration is a temporary bump rather than a systemic retreat. Janlo de los Reyes, head of research and advisory at JLL Philippines, explained that the market slowdown reflects deferred transactions rather than lost business, with several large deals expected to close over the next few quarters.

“Deals are still in place and will be probably locking in by the next couple of quarters. So, these are just delayed deals, not necessarily terminated deals in terms of the office space,” de los Reyes said.

Net take-up landed at roughly 67,000 square meters for the quarter, lifting total first-half absorption to 162,000 square meters. Positive net absorption signals that core corporate demand remains steady moving forward, De los Reyes noted.

According to JLL’s report, AI-Driven CRE Investment: Philippines' Distinctive Path to CRE Transformation, most local firms are stuck in the planning stage of AI integration. While interest is high, corporate leaders face lingering skill gaps, elevated adoption costs, and a lack of clear legal frameworks.

Over the long term, AI is expected to catalyze workforce growth rather than trigger sweeping layoffs, ultimately boosting office space requirements. Rather than replacing workers entirely, local firms are redesigning human roles, spurring plans to recruit additional full-time employees to complement new technologies.

However, realizing that expansion requires a major nationwide labor pivot. Local workers must undergo aggressive reskilling to remain competitive against rapid automation in this evolving future of work, De los Reyes said.