Middle East Crisis Casts Shadow on Metro Manila Office Market Rebound

Metro Manila’s office market is expected to finish the year weaker than initially projected, as the ongoing Middle East crisis delays corporate expansion plans, according to Colliers Philippines. During its second-quarter property briefing, Kevin Jara, Colliers director and head of office services-tenant representation, stated that the firm has cut its full-year office demand and vacancy forecasts following a slowdown in leasing activity from April to June. “So now we’re at 300,000 square meters (sq m) net. That’s down from 400,000 which we originally envisioned for the year,” Jara said. Colliers has lowered its net take-up forecast to 300,000 sq m from 400,000 sq m and now anticipates a 19.3 percent vacancy rate for the year. Net take-up in the first half reached only 90,000 sq m, with vacancy at 19 percent. “The Middle East crisis slows down demand in both Metro Manila and provinces,” Colliers said, citing geopolitical tensions. Office transactions fell 24 percent quarter-on-quarter to 145,000 sq m in the second quarter as occupiers delayed leasing decisions, trimmed capital spending, and opted for lease renewals over new space. Consequently, some leasing decisions have been deferred to the second half of 2026 or even 2027. Despite the slowdown, tenants have largely retained their office space, keeping vacancy broadly stable. Business expansion remained the primary driver of demand, with traditional occupiers leasing 203,000 sq m, followed by third-party outsourcing firms with 108,000 sq m, and global capability centers with 25,000 sq m, mostly for relocations. Makati CBD recorded the highest leasing volume at 65,000 sq m, followed by Fort Bonifacio with 63,000 sq m and Mandaluyong with 47,000 sq m. Colliers also noted the potential of Administrative Order No. 45 to unlock more Philippine Economic Zone Authority (PEZA)-accredited office space and expand location options. However, Fort Bonifacio, Makati CBD, and the C5 Corridor continue to offer limited site options due to tight supply. Green-certified offices accounted for 68 percent of first-half transactions. Colliers expects green buildings to comprise 43 percent of Metro Manila’s office stock by 2030.