PH property holds steady amid Middle East conflict
(Conclusion)
Last week, I discussed the factors driving the resilience of the residential sector amid the Middle East conflict and the ensuing rise in fuel prices.
I will now focus on the retail and office segments, which Philippine developers mainly rely on for recurring income.
As previous crises have shown, recurring income from key business segments such as leasing is important in shielding developers from the adverse effects of global economic and health crises. This was especially evident at the height of the COVID-19 pandemic.
Slower economic expansion in Q1 2026 and rising inflation remain major concerns for Philippine property. However, developers with massive retail and office footprints remain cautiously optimistic, especially as foreign mall tenants and office occupiers continue to take up significant retail and office spaces amid ongoing geopolitical tensions.
Smaller retail formats, continued premiumization
As of end-Q1 2026, total retail stock in the capital region reached 7.9 million sqm with about 96,000 sqm completed from Q4 2025 to Q1 2026.
From 2026 to 2028, we project annual average completion of 113,000 sqm of new supply, nearly unchanged from our previous forecast, but significantly lower than the 332,000 sqm completed annually from 2017 to 2019.
Upscale and premium malls are driving the next phase of retail growth from 2026 onwards, as developers double down on experiential, high‑value formats. Upcoming and existing developments increasingly signal strong confidence in premiumization as a strategy to capture resilient consumer demand and future‑proof retail assets.
F&B-led expansion drives retail landscape
Food and beverage (F&B) tenants are set to dominate upcoming retail openings over the next 12 months, accounting for nearly half of new stores.
Other retail categories continue to play a meaningful supporting role. Clothing and footwear brands remain active, while beauty and technology retailers are also expanding, indicating that mall tenant mixes are becoming increasingly F&B‑led but diversified, catering to both everyday consumption and experiential shopping of Filipinos.
We see opportunities for retail segments that continue to entice foreign retailers such as home furnishing and improvement. Foreign brands in this retail space continue to occupy humongous spaces and this should result in greater brick-and-mortar space absorption beyond 2026.
Achieving pre-pandemic mall vacancy likely delayed
Retail vacancy in Metro Manila continues to improve, dropping to 10.8 percent in Q1 2026 from 11.4 percent in Q3 2025. Yearend vacancy is projected to reach 10.2 percent, supported by steady demand and limited new supply.
However, due to external headwinds particularly Middle East crisis, the return to pre‑pandemic retail vacancy will likely be pushed back to H1 2027, indicating a slower and more cautious retail recovery despite the overall positive trend.
Office resilience before the impact
Colliers recorded no new office completion in Q1 2026. For the remainder of the year, we project about 505,000 sqm of new supply to come online, accounting for 50 percent of the new supply.
Over the next four years, we project a more “controlled” level of new supply, averaging about 308,000 sqm annually. In 2027, new office completions in Metro Manila are projected at only 208,000 sqm, with Fort Bonifacio and Makati CBD seeing minimal additions to office stock.
Vacancy improving
In Q1 2026, vacancy eased to 19 percent, a marginal improvement from 19.4 percent in Q4 2025.
Vacancy rates across Metro Manila submarkets remained stable. Vacated spaces reached 119,000 sqm in Q1 2026, reflecting a 41 percent year on year (YOY) decline. ‘Normalized’ vacated space levels are expected in the coming months as surrenders primarily stem from natural end‑of‑lease expiries.
With the full impact of the Middle East crisis yet to be seen, Colliers maintains its 2026 forecast of 19 percent vacancy and 400,000 sqm of net take‑up.
Demand shifting
As of Q1 2026, about 193,000 sqm of office transactions were recorded in Metro Manila, up 12 percent YOY.
Colliers noted that despite the controversy on flood control projects, office leasing remained resilient. Fort Bonifacio ranked first among Metro Manila submarkets, recording 40,000 sqm of office deals, followed closely by Makati CBD with 38,000 sqm.
Meanwhile, shared services saw the largest increase in transactions volume, posting a 122 percent growth YOY.
In contrast, provincial office markets recorded subdued performance during the quarter, with only 37,000 sqm of office demand, representing a 32 percent YOY decline. Iloilo surpassed Cebu, registering 16,000 sqm of office transactions in Q1 2026. —WITH A REPORT FROM KEVIN JARA
