Metro Manila rental yields seen subdued amid high vacancies

Residential Rental yields in some parts of Metro Manila are expected to remain weak this year as developers grapple with unsold condominium units and elevated vacancy rates, property consultants said.

“The current oversupply of condominiums in Metro Manila has placed downward pressure on rental yields,” Jamie S. Dela Cruz, research manager at KMC Savills, said in an e-mailed reply to questions. “The exit of POGOs (Philippine offshore gaming operators), which previously boosted demand, has further softened the market.”

Data from Colliers Philippines showed rental yields in Metro Manila condominiums rose slightly to 4.2% in the second quarter from 4% in 2019. However, the firm said a meaningful recovery is unlikely in the near term.

“We do not see a significant improvement in Metro Manila residential yields for the remainder of 2025 up to 2026 as we are still projecting vacancy rates to hover between 25% and 26%,” Joey Roi H. Bondoc, director and head of research at Colliers Philippines, said.

Colliers data showed that as of the second quarter, 30,500 ready-for-occupancy units remained unsold. Of the total, 32% were from the lower middle-income segment valued at P3.6 million to P6.99 million, while 22% were from the affordable segment priced at P2.5 million to P3.59 million.

The Bay Area, Makati fringe, Pasig and Manila accounted for 35% of the unsold units in Metro Manila.

Mr. Bondoc also noted that rental rates in submarkets are heavily reliant on POGO tenants, such as the Bay Area, remain below pre-pandemic levels. Studio units there now lease for about P700 per square meter (sq.m.) compared with P1,200 per sq.m. before 2020.

The Bay Area — covering Pasay, Manila and Parañaque — posted the highest residential vacancy in the second quarter at 54%.

“Once we see a substantial improvement in vacancy rates and a corresponding rise in rents, then we project yields to marginally increase,” he said. “But given that we still have sizable unsold ready-for-occupancy units in Metro Manila, and with soft demand in the secondary market, we are not projecting a significant increase in yields over the next 12 months.”

Mr. Bondoc added that weak demand is partly tied to hybrid and remote work arrangements. “As a result, employees are no longer required to rent condominium units in Metro Manila and would rather go back to their home provinces and work from home.”

Still, property analysts said landlords could take steps to improve competitiveness.

“Unit owners can differentiate their properties by adding value — such as offering parking spaces, upgrading unit interiors and enhancing amenities such as internet, cable television and security features,” Ms. Dela Cruz said.

She said tenants who could support rental demand include employees under mandatory return-to-office policies, as well as expatriates and professionals who prefer renting to buying.

“As more companies enforce return-to-office policies, occupancy may gradually improve, supporting rental demand,” she said.

“Marketing efforts should focus on tenants with a strong preference for renting, like corporate clients, expatriates, and professionals who reside in nearby provinces but work in Metro Manila,” she added.

Source: Business World

Green is good: Why more developers eye green certifications for buildings

Philippine property developers are increasingly seeking green certifications for office buildings not only because of government energy mandates but also rising demand from multinational companies.

It’s no longer uncommon to find developers touting the sustainable features of their new office buildings, which have received certifications like Leadership in Energy and Environmental Design (LEED), Building for Ecologically Responsive Design Excellence (BERDE), Excellence in Design for Greater Efficiencies (EDGE) and WELL Building Standard.

To get a green building certification, a project must meet certain environmental and sustainability standards. These usually ensure that a building meets high standards of energy efficiency, resource conservation, air quality, among others.

“We see the increase (in green certifications) because of the mandates by the government, such as the Department of Energy, to comply with the laws to Republic Act No. 11285 or known as the Energy Efficiency and Conservation Act,” Jess Niño H. De Villa, Head of Engineering, Energy and Environment of Knight Frank said.

The law requires Philippine businesses to monitor energy consumption, which is the top contributor to net-zero emissions.

“Certification helps ensure compliance with these requirements, avoiding potential fines or legal issues, making it a top reason for properties to adopt green certifications in the Philippines,” Mr. De Villa said.

Green certifications can make a big difference in attracting potential tenants.

“A green-certified building can be more attractive to potential tenants who prioritize environmental responsibility. Green certification can set a building apart, making it a preferred choice for tenants and investors who value sustainability,” he added.

As of now, 31.2% of the 8.5 million square meters (sq.m.) of existing office supply within Metro Manila have varying levels of LEED certifications, Mr. De Villa said.

He noted the NEO Property Management’s real estate portfolio in the Philippines was the first in the world to secure the International Finance Corp.’s (IFC) EDGE Zero Carbon certification. NEO’s entire portfolio is powered by Cleanergy, which delivers 100% renewable energy.

While the cost of securing green certifications can be costly, it can still be worth it for developers.

“In general, (the cost of the) certification is still quite low in terms of the savings that you can be able to gain and for the revenue,” Mr. De Villa said.

STRONG DEMAND

Demand for green certified buildings in the Philippines is also driven by multinational companies.

“It’s largely because of the Western companies and Western tenants moving to the country, requiring their buildings to be LEED certified. Their head offices in, let’s say, London and the US, have certain requirements for the office space that they need to occupy here,” Leechiu Director of Research Roy Amado L. Golez, Jr. said.

Mr. Golez said most of the newer buildings are compliant with green building standards, mainly because they don’t want to lose out on the tenants whose parent companies are based or headquartered in Western countries.

“It has become a must-have. If you don’t have it, your market might be smaller,” Mr. Golez said.

CBRE Philippines Country Head Jie C. Espinosa said global companies make green building standards a “first hurdle” when choosing office spaces.

“There are certain cases, that these occupiers consciously negotiate provisions in their contract, that down the road developers need to be proactive in providing sustainable features into their buildings,” Mr. Espinosa said.

Green leases, rental agreements where tenants and landlords set sustainability-related targets, benefit both parties by raising the value of the property and creating incentives for tenants.

Mr. De Villa said domestic companies also see green-certified office buildings as an ideal location for their operations, as they also seek to comply with evolving environmental standards.

He also noted that tenants that want to integrate sustainability in their operations are willing to pay premium rates to secure office spaces in buildings with green certifications.

ADOPTION HIGH IN METRO MANILA

Central business districts in Metro Manila have seen significant gains in green building adoption in recent years, CBRE Philippines Director of Advisory and Transactions Services Garri Amiel P. Guarnes said.

Based on CBRE data, the office segment in Fort Bonifacio has seen its green building adoption rate jump to 73% in 2024 from 63% in 2022.

For Alabang, the green building adoption rate inched up to 67% this year from 49% two years ago.

The green building adoption rate in Ortigas rose to 66% in 2024 from 42% in 2022, while in Quezon City, it went up to 45% in 2024 from 42% in 2022.

However, green building adoption in provincial locations is lower than in Metro Manila, Mr. Guarnes said.

“This was due to developers being more focused towards third-party outsourcers but moving forward, these companies or the clients they serve would implement their sustainability targets,” he said.

In Davao, 24% of the office stock is green certified, followed by Cebu with 23%, Iloilo with 16% and Pampanga with 8%.

However, Cebu is leading in terms of the rate of increase in adoption, Mr. Guarnes said.

In Cebu, 44% of the recent completions between 2020 and 2024 have green certifications, while 16% are still under application.

FIVE-STAR BERDE

For Aboitiz InfraCapital, Inc., its 800-hectare LIMA Estate in Lipa-Malvar, Batangas, is one of the strongest examples of a green-certified property.

“It’s been recognized as a five-star BERDE, which means it is implementing sustainable practices that are aligned with the global standards,” Aboitiz InfraCapital, Inc. Economic Estates Vice-President for Inventory Generation Group Jolan P. Formalejo said.

BERDE is a local green building system rating that was developed by the Philippine Green Building Council.

Mr. Formalejo said the developments inside the estate, such as the Outlets at Lipa and the LIMA Tower 1 were five-star BERDE certified in 2022.

LIMA Tower 1 holds a BERDE certification for environmental sustainability, and has pre-certification from the WELL Building Standard, which assesses features promoting health and well-being.

“Hopefully, once we start to operate LIMA Tower 1, all the tenants will appreciate the operational savings that they can achieve,” Mr. Formalejo said.

He said the Smart Water Network, wherein its water facilities turn into interconnected and intelligent systems, operated by LIMA Water Corp., resulted in 30% savings in operations and uptime of 99.3%. It is also less than 5% in terms of wastage of non-renewable water.

“Soon we will be developing our Tower 2. We’ll also gear up for these certifications,” he said, adding that The West Cebu Estate and Mactan Economic Zone 2 Estate are aiming for five stars this year.

Mr. Formalejo noted these green certifications make the locators feel secure knowing their business operates inside a sustainable development along with the assurance that all these facilities and systems are future proof.

Source: Business World

PH unemployment at 3-year high

The country's labor market worsened in July following the series of typhoons that struck the country, the Philippine Statistics Authority (PSA) reported on Wednesday.

The country’s unemployment rate was recorded at 5.3 percent, up from 4.1 percent and 3.7 percent a month and year earlier. This is the highest recorded jobless rate since June 2022 at 6.0 percent.

source: PSA

This translates to 2.59 million unemployed Filipinos, higher than the 1.95 million and 2.38 million recorded in June and July 2024.

Meanwhile, underemployment — which counts those looking for more work or an extra job — rose to 14.8 percent, up from 11.4 percent in June. It is also higher than the 12.1 percent recorded a year ago.

The number of underemployed individuals stood at 6.80 million. These are workers who expressed a desire for additional hours in their current job, an additional job, or a new job with longer hours.

Employment rate, meanwhile, dropped to 94.7 percent, lower than the 96.3 percent and 95.3 percent recorded a month and year earlier. The number of individuals with jobs reached 46.05 million.

The country’s Labor Force Participation Rate (LFPR) in April was registered at 60.7, markedly lower than the 65.7 percent in June and 63.5 percent in July 2024.

Source: Manila Times