Offshoring trend to cushion office slowdown — Leechiu

THE Philippine office market may slow down slightly, but demand is expected to be supported by continued offshoring by global firms, according to Leechiu Property Consultants (LPC) Chief Executive Officer David Leechiu.

“I think office will probably slow down a little bit, but it will be the best performing of the asset class because now more than ever, companies are going to offshore to the Philippines even more,” he told reporters on the sidelines of LPC’s first-quarter market briefing on Tuesday.

He said demand may soften alongside broader economic pressures, but offices are expected to remain the most resilient asset class even as some firms adopt flexible or hybrid work arrangements.

“They still need the office. Now more than ever, COVID has taught people that we need the office,” Mr. Leechiu noted.

The country’s office market started 2026 with stronger net demand, as net absorption rose 77% to 133,000 square meters (sq.m.) in the first quarter.

Traditional occupiers drove demand, accounting for 143,000 sq.m., or 61% of total take-up. Information technology and business process management (IT-BPM) firms contributed 79,000 sq.m., or 34%.

Expansion deals dominated both segments, with 112,000 sq.m. recorded for traditional tenants and 51,000 sq.m. for IT-BPM firms.

Mr. Leechiu said property demand is beginning to soften as global geopolitical developments push inflation higher and dampen consumer spending.

“I think we’re feeling it now. Ever since this war started, the inflation numbers are going to be so high,” he said. “It’s going to be higher, and so it’s really hitting the middle class and the lower class, which is why this corruption issue has to be managed quickly.”

Oil price shocks linked to the Middle East conflict pushed Philippine headline inflation to a 20-month high of 4.1% in March, from 2.4% in February and 1.8% a year earlier. This exceeded the central bank’s 3.1%-3.9% forecast for the month.

Some property markets are showing early signs of pressure as rising costs and economic uncertainty weigh on demand.

Tourism-driven Palawan may be among the hardest hit, as limited flights, high airfares, and elevated logistics costs increase travel and goods expenses.

In Metro Manila, areas with large existing supply such as the Bay Area, Ortigas, Mandaluyong, and Quezon City may face pressure due to a mismatch between supply and demand across residential, office, and retail segments.

“The most balanced market is still Makati, Bonifacio, and Alabang,” Mr. Leechiu said.

“I think Bonifacio Global City (BGC) is the safest market in every asset class, followed by Makati, Cebu, and Iloilo,” he added.

In the first quarter, Makati City led office transactions in Metro Manila with 76,800 sq.m., equivalent to 54% of its total demand in 2025. Bonifacio Global City recorded the lowest vacancy rate at 8%, compared with the Metro Manila average of 18%.

Outside Metro Manila, office demand reached 34,000 sq.m., led by Cebu with 11,700 sq.m., followed by Iloilo with 11,000 sq.m. and Clark with 6,600 sq.m.

Residential demand is expected to slow, while retail activity may also weaken. However, Mr. Leechiu said malls could prove relatively resilient as consumers continue to visit them, partly due to amenities such as free air conditioning.

“So I think yes, there will be a slowdown in malls, but not as bad as what people think it will be,” he said.

He added that if geopolitical pressures persist and lead to further price increases, consumer behavior inside malls could shift. Foot traffic may decline slightly, but purchasing power could weaken more significantly.

“People will still be in the mall, but they will not be spending the same way as pre-March 2, when the war started.” — Alexandria Grace C. Magno