Philippine Industrial Market: Supply Pulls Back as Core Demand Remains Resilient

Philippine Industrial Market: Supply Pulls Back as Core Demand Remains Resilient

Savills Philippines report shows industrial construction pipeline for 2026 falling to 152,000 sq m, even as leasing activity holds steady across key Luzon corridors.

TAGUIG CITY, Philippines – Savills Philippines, a member of global real estate services provider Savills plc, today released its 1H 2026 Industrial Market Report, which found that new industrial supply in the Philippines is set to decline sharply in 2026 even as core occupier demand across the country's key manufacturing and logistics corridors remains stable.

According to the report, the Philippines' industrial construction pipeline for 2026 is expected to deliver only 152,000 sq m of new warehouse space, down from 450,000 sq m completed in 2025. The pullback is attributed to rising construction material costs and broader macroeconomic headwinds, including a slowdown in the country's gross domestic product growth, which registered 2.3% year-on-year in the second quarter of 2026 against the government's full-year target range of 3.5% to 4.5%.

Of the reduced 2026 pipeline, roughly 67,000 sq m is expected to be added to North Luzon's warehouse stock, concentrated largely in Pampanga and Bulacan. Laguna, despite already holding the corridor's largest existing warehouse base, still accounts for 25,000 sq m of upcoming supply, indicating that developer activity in the province has not fully paused despite the broader slowdown.

Even with the constrained supply outlook, the report found that demand across South Luzon's industrial corridor has remained resilient. Laguna, Batangas and Cavite together accounted for 80% of total leasing transactions recorded in the first half of 2026. Batangas posted the corridor's largest average deal size within industrial parks at 7,333 sq m, more than three times Laguna's average of 2,102 sq m, reflecting a small number of large manufacturing-related commitments in the province. Logistics and e-commerce-driven demand, meanwhile, remained concentrated almost entirely in Laguna.

Vacancy rates across South Luzon's industrial parks also pointed to sustained occupier interest, with the corridor's average vacancy holding well below levels typically associated with oversupply. Laguna posted the tightest vacancy in the south at 3.5%, while Bulacan recorded 1.7% vacancy in North Luzon, which the report attributes to the province's proximity to Metro Manila sustaining demand even without PEZA incentive status.

"What we're seeing in the first half of 2026 is a market that is recalibrating rather than retreating," said Joe Curran, CEO of Savills Philippines. "Developers are responding rationally to higher construction costs by slowing new supply, but occupiers, particularly in logistics and manufacturing, continue to commit to space in established corridors. That combination points to a market that remains fundamentally sound even as broader economic conditions stay challenging."

The report also noted headwinds on the investment side, with net foreign direct investment declining to USD 210 million in May 2026, bringing the five-month cumulative total to USD 2.178 billion, a 33% year-on-year decline from USD 3.270 billion in the same period in 2025. Manufacturing continued to account for the largest share of these inflows, at 56%, with Japan and the United States remaining the leading sources of investment.

Looking ahead, the report identifies electricity supply and grid reliability as an emerging factor in industrial site selection, alongside continued growth in e-commerce-driven logistics demand, which is expected to remain one of the more durable sources of warehouse absorption in the Philippines.

Savills Philippines' Research team tracks warehouse stock, leasing activity, rental rates and vacancy across the country's key industrial provinces, including Laguna, Cavite, Batangas, Pampanga, Bulacan, Bataan and Tarlac. The full 1H 2026 Industrial Market Report is available through Savills Philippines' research publications.