Industrial demand remained robust in the first half (H1) of 2026, led by semiconductor, food and beverage, and fast-moving consumer goods (FMCG) manufacturers seeking facilities with modern specifications and strategic access to ports and expressways amid rising fuel costs. The semiconductor segment is particularly significant to the Philippine economy, as electronics have long been the country's largest export category, which helps explain why industrial players in this sector carry weight in demand for industrial space. Central Luzon is expected to be a major contributor to new industrial space beyond 2026, which should benefit property firms with large and growing industrial footprints in the region.

Central Luzon's industrial profile is increasingly thriving, with higher-value industrial players locating and expanding within the region's massive and sophisticated industrial parks. Over the past few years, major players such as Ajinomoto Philippines Corp. and Coca-Cola Beverages Philippines, Inc. have occupied industrial space in the region. Other new, high-profile entrants include electric vehicle and fiber cement manufacturers.

Supply expanded with 230 hectares (ha) of new industrial developments in Southern and Central Luzon, including TARI Estate in Tarlac, while another 190 ha are expected by yearend, mostly in Cavite.

Rental rates softened for traditional warehouses across Cavite, Laguna, Batangas (Calaba), Central Luzon, and Metro Manila, but modern warehouse rents continued to rise. Industrial vacancy improved, declining to 13.1% from 14.1% at end-2025 due to stronger absorption. The divergence between traditional and modern warehouse rents reflects a broader trend across regional logistics markets, where occupiers increasingly prioritize facilities that can support automation and faster turnaround over older, lower-cost stock.

Rising Demand for Modern Warehouses

In H1 2026, Colliers recorded a 3% correction in average rents for traditional warehouses across Southern Luzon, Central Luzon, and Metro Manila half on half (HoH). Meanwhile, average lease rates for modern warehouses in these locations grew by 8% HoH during the period. Colliers believes this is an opportune time for landlords and developers to retrofit and renovate existing facilities, given the heightened demand for modern warehouses.

Features of these modern warehouses include a floor-to-ceiling height of between 12 and 14 meters (m), up to 5 tons of floor load capacity, a fire sprinkler system, and light illumination. Some warehouse operators are further automating their facilities through the integration of advanced robotics and conveyor systems. According to Colliers, further adoption of technological innovations is crucial for landlords and warehouse operators to enhance their services and secure strong pre-leasing for state-of-the-art facilities.

Highlighting Facilities Near Major Infrastructure

Data from the Philippine Statistics Authority (PSA) show that logistics cost inflation in the country reached 16.8% in the second quarter (Q2) of 2026, a 21-year high. Transport inefficiencies, port congestion, and supply chain disruptions have significantly increased operating costs. High logistics costs have long been cited as a competitiveness challenge for the Philippines relative to some Southeast Asian neighbors, making location efficiency an even bigger factor in industrial site selection.

Colliers recommends that developers and warehouse operators highlight their facilities' proximity to major infrastructure. The firm expects more companies, particularly e-commerce and export-oriented firms, to locate within micro-warehouses, distribution centers, and factories in major industrial corridors with direct access to highways, toll roads, and ports. While warehouses in Calaba and Central Luzon remain top-of-mind locations, facilities in Metro Manila are also well positioned for micro-warehousing and last-mile fulfillment operations, making them ideal for firms seeking to minimize urban delivery costs.

Maximizing the Manufacturing Push

The Philippines remains an attractive manufacturing destination for international manufacturers seeking to expand and diversify their supply chains in Southeast Asia. The Philippine government has been actively attracting investments from traditional and nontraditional trade partners such as Taiwan, Japan, Singapore, Thailand, Sweden, and Brazil.

Colliers Philippines believes developers can maximize opportunities by actively participating in overseas trade fairs and investment missions mounted by investment promotion agencies (IPAs) such as the Philippine Economic Zone Authority (PEZA) and the Board of Investments (BoI). Developers can take advantage of these events to promote the Philippines as a manufacturing hub and highlight the benefits of locating within the country's industrial parks.

Game Changer or a Major Bummer?

The Central Luzon industrial sector is also likely to benefit from the Pax Silica initiative. Colliers sees the 4,000-acre semiconductor and advanced hardware manufacturing hub complementing the Luzon Economic Corridor, boosting industrial activities across Clark, Subic, Batangas, and Manila. In Colliers' view, the property market in general will benefit from the initiative, and as business activity accelerates, the project is likely to have a positive spillover effect on the residential, office, and hospitality segments. The project's focus on semiconductors aligns with global efforts to diversify chip production geographically, positioning the Philippines to capture a share of that investment flow if execution risks are managed.

However, Colliers flags several risks that the government needs to address to ensure the initiative's long-term sustainability. The Bases Conversion and Development Authority (BCDA) recently clarified that Pax Silica will not host hyperscale data centers and will focus on semiconductor manufacturing activities. While this reduces concerns over the massive power and water requirements associated with data centers, the project still faces risks such as environmental concerns, critical mineral sourcing, and geopolitical conflicts arising from potential trade tensions — particularly given the semiconductor industry's heavy reliance on complex global supply chains. Colliers also believes the government should implement a massive information campaign to address Filipinos' concerns.

Joey Roi Bondoc is the director and head of Research of Colliers Philippines (joey.bondoc@colliers.com).