Cushman sees AI reshaping Metro Manila office leasing demand

THE growing adoption of artificial intelligence (AI)-augmented workflows, particularly in the information technology and business process management (IT-BPM) sector, could reshape office demand in Metro Manila by reducing incremental space requirements, according to Cushman & Wakefield.

“Simultaneously, the Philippine office market is being reshaped by the rising adoption of AI-augmented workflows — particularly in the IT-BPM sector—leading to leaner team structures and reduced incremental space requirements,” Claro Cordero Jr., director and head of research, consulting and advisory services at Cushman & Wakefield, said in the property consultancy’s first-quarter market report.

He also said global business sentiment remains cautious amid the ongoing Middle East crisis, prompting firms to expand flexible work arrangements and delay leasing decisions, which could soften office space net absorption over the next three to six months.

Metro Manila’s office vacancy rate eased to 17.1% in the first quarter from 17.9% in the previous quarter, supported by steady leasing activity and limited new supply across central business districts (CBDs) and decentralized office markets.

Net absorption reached 62,000 square meters during the quarter, driven largely by expansion from the IT-BPM sector, including business process outsourcing and shared services occupiers, with leasing activity concentrated in the Makati CBD and Bonifacio Global City.

Despite the improvement in occupancy, average headline rents softened to P959 per square meter per month due to more competitive pricing in higher-vacancy submarkets.

The report also showed a widening gap in vacancy levels between prime and non-prime office locations. Vacancy in core CBDs stood at around 10%, while decentralized markets continued to post elevated vacancy rates of 24.4%.

“The Metro Manila office demand remained resilient in early 2026, with steady leasing momentum in prime buildings despite softer economic growth and rising uncertainty. However, ongoing Middle East tensions are weighing on business sentiment, prompting more cautious decision-making and wider adoption of hybrid work arrangements. This is likely to extend leasing timelines, but we expect this to change as soon as the Middle East tensions improve,” said Dom Fredrick Andaya, country head of Cushman & Wakefield Philippines.

The property consultancy said rising energy costs, supply chain disruptions and construction inflation continue to weigh on the local real estate sector.

The report also noted that demand for green and energy-efficient prime office spaces is increasing as occupiers prioritize energy resilience, while older office assets face weaker demand and lower yields.

Cushman & Wakefield also said investors and occupiers are increasingly prioritizing resilience, operating efficiency, and stronger tenant profiles amid economic uncertainty. — Juliana Chloe A. Gonzales