Net absorption continues to increase, led by Makati City as IT-BPM and media firms drive leasing demand

• The office sector absorbed 51,718 sqm in Q1, concentrated in Makati City. Leasing in the city was driven by a media firm with 3,400 sqm and IT-BPM firms with 3,200 sqm of take-up.
• Meanwhile, Taguig City’s leasing activity was led by a technology firm securing 2,400 sqm, a media and entertainment company absorbing 1,300 sqm and a construction firm taking up 1,100 sqm.

Vacancy rates increase as new supply added to the market outpaces occupancy gains

• Q1 2026 deliveries totalled 29,100 sqm with the completion of Gentry Corporate Plaza. Other projects initially scheduled for Q1 shifted to Q2 2026 due to delays. Approximately 202,214 sqm of new office inventory is scheduled by year-end 2026.
• Vacancy rates expanded to 14.6% in Q1 2026, up 45.6 basis points from the prior quarter. New inventory deliveries drove the increase, though steady leasing activity across key submarkets and industry sectors partially offset the impact.

Rental rates hold steady as capital values increase moderately

• Average monthly rents remained at PHP 1,088.3 per sqm throughout Q1 2026, reflecting landlords’ decisions to waive escalation rates to maintain occupancy levels.
• Capital values rose slightly by 0.1% during Q1 2026 to reach PHP 189,946 per sqm, reflecting sustained investor confidence.

Outlook: Moderate growth is expected in 2026 from sustained momentum

• Sustained occupier interest is anticipated from the IT-BPM, technology and financial services sectors amid flight-to-quality trends, though considerable new supply may lead landlords to enhance incentives and offer competitive pricing to secure tenants.
• Rental rates face potential downward pressure from incoming supply, though well-occupied assets may hold current levels. Capital values may experience modest pressure as investor sentiment remains cautious.