The Philippine office market may face higher vacancy levels by 2027 as new developments are expected to outpace tenant demand, according to property consultancy Prime Philippines.

In a recent report, Prime said Metro Manila alone is projected to add between 328,000 square meters and 478,000 square meters of new office space through 2027. The additional supply could put pressure on occupancy levels and rental rates over the medium term.

“With office supply expected to increase between 1 percent and 2 percent in 2026, a downward pressure on overall occupancy and lease rates is expected as expansions may not exceed or keep pace with additional space,” the firm said.

Despite this outlook, the Metro Manila office market closed 2025 with an 85 percent occupancy rate, up 1.8 percentage points from the previous year. Prime attributed the improvement to sustained demand from business process outsourcing (BPO) companies, professional services firms, and government agencies.

By location, the Makati Central Business District posted the highest occupancy rate at 90.5 percent, followed by Bonifacio Global City at 89.5 percent and Ortigas CBD at 89.4 percent. Muntinlupa City and Quezon City recorded occupancy rates of 80.9 percent and 82.2 percent, respectively. The Bay Area continued to lag, with demand translating to an occupancy rate of 68.5 percent.

Prime also reported improving office demand in regional markets, particularly in Metro Davao, Metro Cebu, Metro Clark, Iloilo, and Bacolod.

“To be honest, we are still yet to see the holy grail that would replace the POGO (Philippine Offshore Gaming Operators) tenants,” Prime Philippines founder and chief executive officer Jettson P. Yu said.

Looking ahead, the consultancy expects BPO firms to remain the main source of office take-up, with expansion activity increasingly shifting to areas outside Metro Manila, such as Cavite, Iloilo, Laguna, and Bacolod.

Meanwhile, the industrial real estate segment continued to show strong performance, driven largely by demand for build-to-suit facilities and hybrid warehouses that integrate storage with on-site sales and logistics functions.

Joy Rosario, vice president for the industrial market at Prime Philippines, said locators have shown a clear preference for flexible warehouse formats that support both distribution and customer-facing operations.

In 2025, the country’s industrial sector recorded a full-year occupancy rate of 97.3 percent. High utilization levels were seen in Metro Davao and Misamis Oriental at 98 percent each, followed by Laguna at 97.9 percent. Bulacan, Pampanga, and Cavite each posted occupancy rates of 97.4 percent.

Warehouse demand was led by wholesale and retail trade, which accounted for 29.14 percent, followed by transportation and storage at 24.13 percent, and manufacturing at 14.91 percent.

For 2026, Prime expects new warehouse developments to be delivered in Pangasinan, Cavite, and Batangas.

Mr. Yu also noted that some property developers are adjusting their strategies by selling off assets and redirecting capital to other sectors. He said one developer has divested Metro Manila properties to invest in cold storage facilities, while another liquidated residential assets to focus on renewable energy projects. A separate developer has shifted away from township developments toward high-end residential villages.

“That’s a massive signal that they are raising liquidity, lessening their debts, and at the same time, repositioning for the next five to 10 years,” Mr. Yu said.