PRIME’S 2026 Q3 Real Estate Market Briefing finds landlords, occupiers, and investors squeezed by rising costs, even as offices, warehouses, and regional hubs kepp absorbing space.
The Philippine economy entered the second half of 2026 under heavier strain than at midyear. The pesos closed at a record low of PHP 62.86 to the U. S. dollar on September 14, 2026. Inflation, while running at 6.1 percent in August 2026, prompted the Bangko Sentral ng Pilipinas (BSP) to raise its policy rate to 5.0 percent. The newly released September inflation reached 7.2 percent in the second quarter, and household spending rose 2.8 percent, its weakest pace since 2010 outside the pandemic.
Yet PRIME Philippines’ 2026 Q3 Real Estate Market Briefing finds that the property market’s pain is concentrated on the cost side of the ledger, not in a collapse of demand.
A Deficit Spiral Takes Shape
PRIME describes the macroeconomic backdrop as a deficit spiral with three reinforcing loops. The national government’s deficit reached PHP 1.05 trillion from January 2026 to August 2026, up 21 percent year on year, as interest payments climbed 17.5 percent to PHP 686.5 billion while revenue grew only 4.27 percent. Debt reach 66 percent pf GDP at the end of June 2026, the highest since 2004. The trade deficit widened 26 percent to $41.6 billion in the first eight months as fuel imports grew costlier, foreign direct investment fell 17.8 percent in the first half, and Fitch moved its outlook on the country to negative.
Costs, Not Demand
PRIME’s own stakeholder survey shows where the pressure lands. Forty-eight percent of landlords name operating and financing costs as their top competitive threat, and 43 percent of occupiers cite the same costs as the war’s main effect on their business, investors rank high development cost as the number deploying capital.
The Deficit Spiral: Three Loops Feeding a Wider Gap
Rising Costs Top of the List of Stakeholder Concerns
Office: Tenants Return as Supply Dries Up
Metro Manila’s office market posted 528,000 square meters of net take-up in the third quarter, outpacing 289,000 square meters of new supply and lifting occupancy to 85.0 percent from 83.2 percent in the first half. Occupied stock reached a record 13.4 million square meters. With only 154,000 square meters due in the four quarter and 149,000 square meters in 2027, against yearly average of 667,000 square meters from 2017 to 2025, landlords are regaining leverage.
Industrial: Warehouses Keep Moving
Luzon warehouse requirements reached 292,000 square meters in the third quarter, more than double the 145,000 square meters a year earlier. Average rents rose in all six markets PRIME tracks, led by Metro Manila at 11.8 percent, and 65.8 percent pipeline will rise inside industrial parks.
Visayas and Mindanao: Slack, Not Slump
Cebu’s office leasing softened, with net take-up turning negative in the third quarter and occupancy easing to 81.1 percent, yet average rents of PHP 665 per square meter now exceed pre-pandemic levels. Davao, meanwhile, will receive 145,000 square meters of offices from 2027 to 2029, nearly the 166,000 square meters it added over the previous nine years, as office requirements jumped 73 percent in the first nine months.
Adapting to the Squeeze
PRIME advises consumers not to leave savings idle while inflation erodes cash, investors to consider locking in fixed-rate financing related ahead of further rate hikes, and landlords to prioritize tenant retention, since occupiers are currently absorbing the brunt of higher prices.
“The war hit the cost of doing business, not the appetite for space,” the briefing states. “The players who adapt early will be the ones who come out ahead.”
PRIME Philippines’s full 2026 Q3 findings, including sector breakdowns for office and industrial real estate in Metro Manila, Luzon, Cebu, and Davao, are available through PRIME Philippines Research & Advisory.
About PRIME Philippines
PRIME Philippines is the country’s fastest growing and most disruptive commercial real estate advisory firm. Established in 2013, PRIME has redefined the brokerage industry by replacing outdated practices with innovation, data intelligence, and relentless execution. With full-service offices in Manila, Cebu, and Davao, PRIME has completed over 300 high-impact projects nationwide. Backed by a team over 100 professionals, PRIME is multi-awarded and trusted by the country’s top developers, investors, and occupiers. It is involved in big ticket office transactions and holds the No. 1 position in industrial leasing nationwide.
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