The country’s real estate performance in the first half of 2025 suggests a market not merely weathering global turbulence but actively repositioning to align with structural and geographic shifts in demand.
Prime Philippines says that among the country’s major office hubs, Davao recorded the highest occupancy at 90 percent, with major business process outsourcing (BPO) expansions offsetting the impact of minor dips from lease expirations and tenant exits linked to cost constraints, downsizing or shifts to remote work.
Prime Philippines provides data-driven commercial real estate consultancy and investment advisory in the Philippines.
The city’s tenant mix, it adds, also continues to diversify, with healthcare support, professional services, finance, education and government offices expanding their presence.
Furthermore, shifts in tenant behavior continue to shape leasing patterns. In Davao, companies are increasingly seeking 150- to 700-square-meter spaces to accommodate phased expansions or hybrid work setups. Flexible arrangements such as shorter leases, break clauses and plug-and-play offices are becoming standard for new or scaling teams.
Grade A buildings with PEZA accreditation, strong IT infrastructure, backup power and good transport links remain preferred, although cost-conscious tenants are open to well-located Grade B options with efficient layouts.
Warehouse demand
The industrial sector recorded one of its strongest half-year performances to date. Nationwide warehouse demand surged to 80 percent with 691,900 square meters in the first half of 2025 compared to the second half of 2024, powered by wholesale and retail, logistics and manufacturing activities.
According to Prime Philippines, Bulacan emerged as a standout, with the retail sector accounting for almost 83 percent of local requirements, equivalent to 13 percent of total national demand, reflecting its long-standing position as a preferred location for Metro Manila–based retailers seeking to strengthen their supply chains.
Cavite, meanwhile, has seen a notable shift in demand patterns. Manufacturing-related interest, which began tapering off in late 2024, has continued to soften as tenants favor Batangas for its larger land supply, lower costs and proximity to major ports.
In contrast, logistics demand in Cavite has remained stable, reinforcing its role as a last‑mile delivery hub and signaling its evolution from a balanced manufacturing‑logistics base into a logistics‑anchored submarket.
On the other hand, Laguna has experienced a slowdown in new demand due to historically low vacancy rates, averaging below four percent, which have pushed some prospective tenants toward neighboring corridors such as Cavite and Batangas.
Retail power
In-step with the industrial market’s stability, retail demand continues to build up, with food and beverage operators leading the expansion.
Retail demand in the first half of 2025 remained anchored by robust food and beverage (F&B) activity, which accounted for 37 percent of total requirements. Fifty-one percent of this demand came from outside Metro Manila.
While mall formats remain a mainstay, many major chains continue to seek standalone lots, valuing the flexibility they offer in brand identity, space optimization and customer experience.
Beyond the established brands, smaller players and start-ups are carving out a niche by turning restaurants into destinations in themselves, most notably through “Instagrammable” cafés that blend dining with experiential design. Convenience stores and many F&B brands are also adopting an alternative positioning strategy by locating near residential communities, tapping into built‑in foot traffic and repeat customers.