Office recovery faces a supply test
From AB Capital's The Opening Bell: Three Moves
Event
Metro Manila office transactions fell 24% QoQ to 145,000 sq.m. in 2Q26, while 1H26 vacancy held at 19%. We think demand has been deferred rather than cancelled, but the expected 434,000 sq.m. of 2H26 completions should keep landlords competitive on pricing, incentives and amenities.
View
The read-through for property is mixed. Prime central business districts (CBDs), Philippine Economic Zone Authority (PEZA)-accredited buildings and transit-oriented locations should remain relatively resilient, while older or secondary assets face greater repricing risk. Administrative Order (AO) 45 and growing flex space demand could improve absorption, although provincial leasing remains notably weaker than Metro Manila.
Catalyst
Using Colliers' 19.3% 2026E vacancy forecast as our base, every 100bp increase in vacancy lowers occupied space by roughly 1.2%. If this coincides with a 5% rental rate decline, we estimate gross rental revenue could fall about 6% versus base, before considering escalations or tenant mix changes.
Action
In our view, this favors landlords with stronger locations, PEZA eligibility and balance sheets that can protect occupancy through selective incentives, e.g. Robinsons Land Corp. (RLC), Megaworld Corp. (MEG), and Ayala Land Inc. (ALI), while weaker buildings may need more aggressive repricing.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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