Metro Manila’s retail sector is stabilizing, but not without headwinds. Total stock reached 7.9 million sq m as of Q1 2026, with new supply moderating sharply versus pre-pandemic highs. Vacancy improved to 10.8 percent, driven by sustained demand from FandB and fashion, although store closures persist. We see vacancy normalizing by H1 2027, but risks are rising. The Middle East crisis could dampen remittances, inflate costs, and temper consumption. Still, premium and experiential malls are leading the recovery. In our view, developers with strong leasing income and curated retail formats are best positioned to navigate volatility and sustain growth.
As of end-Q1 2026, total retail stock in the capital region reached 7.9 million sq meters with about 96,000 sq meters completed from Q4 2025 to Q1 2026. From 2026 to 2028, we project the annual average completion of 113,000 sq metres of new supply, significantly lower than the 332,000 sq meters completed annually from 2017 to 2019.
Colliers data showed that Metro Manila retail vacancy improved to 10.8 percent in Q1 2026 from 11.4 percent in Q3 2025. While Colliers recorded sustained take-up from the FandB and clothing and footwear segments, we also noted closures of several brick-and-mortar stores following the expiry of their leases. Given the geopolitical tensions in the Middle East, Colliers now expects that vacancy will likely return to pre-pandemic levels by H1 2027.
Upscale and premium malls are driving the next phase of retail growth from 2026 onwards, as developers double down on experiential, high value formats. In our view, differentiation and curation will be key in sustaining the retail sector’s recovery post-Covid. More foreign brands are entering the Philippine market, and more premium retail spaces are being developed within and outside the capital region. These should help future-proof retail in the years to come.
Navigating the impact of the Middle East crisis
Philippine property is constantly challenged by domestic and external factors. Right now, we are seeing the emergence of new challenges. The Middle East crisis and the ensuing rise in the price of oil are likely to disrupt supply chain operations, raise prices of construction materials, and temper demand.
Property developers are closely monitoring the Middle East situation as remittances from the region covered nearly a fifth of total remittances in 2025. Remittance-receiving households, especially those depending on remittances from the Middle East, might hold off major big-ticket purchases including property. The retail and leisure sectors could also face headwinds from slower remittances and rising inflation.
The industrial segment is expected to remain relatively resilient. However, rising oil prices are also increasing logistics costs, which could shift demand toward warehouses located near ports, major roads and residential areas. Facilities with strategic access and modern, efficient designs are likely to see stronger demand as companies seek to optimize costs.
Slower economic expansion in Q1 2026 and rise in inflation are major concerns for the Philippine property. But developers with massive retail and office footprint continue to remain cautiously optimistic especially as we see foreign mall tenants and occupants still taking up massive office and retail spaces amid the ongoing Iran conflict. In our view, recurring income derived from key business segments such as leasing are important in shielding developers from the adverse impacts of global economic crises.