Modernization key as tenants raise standards

Tenant demand for resilient, green-certified buildings is pushing Philippine developers to modernize projects and tighten compliance, analysts said.

Property developers must ensure that their projects are updated with current building codes and leverage the expertise of third-party evaluators as more tenants prioritize safety and sustainability in their choice of office and residential spaces.

“Global occupiers increasingly prioritize buildings that are disaster-resilient, energy-efficient, and structurally sound, as this supports business continuity, employee safety, and talent retention,” Erika Recomite-Manasan, senior manager for commercial leasing at Leechiu Property Consultants, said.

She said developers that consistently modernize and upgrade their buildings are more likely to attract and retain occupiers compared to outdated properties.

The need for compliance was underscored last month when the Department of Environment and Natural Resources (DENR) flagged the Monterrazas de Cebu residential project for multiple violations of environmental standards.

Developers must secure all required permits and clearances before construction, Ms. Manasan said. These include zoning and building permits from local governments, an environmental compliance certificate from the DENR, utility clearances, an occupancy permit and a fire safety certificate.

Developers must likewise comply with geotechnical and soil testing, structural analysis under the Department of Public Works and Highways and occupational safety and health requirements from the Department of Labor and Employment.

“We advise occupiers to seek the expertise of independent third-party organizations (architectural and engineering firms) to vet the structural integrity of the building, its resilience to fire, earthquake, and flood,” she said.

Ms. Manasan also noted that more tenants are favoring developments with green building certifications amid the looming climate crisis.

These include the US Green Building Council’s LEED (leadership in energy and environmental design) certification; the International WELL Building Institute’s WELL certification; and the International Finance Corp.’s EDGE (excellence in design for greater efficiencies) certification.

Nigel Paul C. Villarete, senior adviser at technical advisory group Libra Konsult, cited the need for local governments to regularly review their comprehensive land use plans  to ensure that real estate developments comply with environmental, social and economic goals.

“It has to be revisited as frequently as possible, because development is constant, especially in urban areas like Metro Manila, Metro Cebu and other metropolitan areas,” he said.

Source: Business World

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

New law allows foreign investors to lease land in the Philippines for up to 99 years

President Ferdinand R. Marcos, Jr. signed into law a measure that allows foreigners to lease land in the Philippines for up to 99 years.

Republic Act (RA) No. 12252 amends RA No. 7652 or the Investors’ Lease Act by further liberalizing the lease of private lands by foreign investors.

“It is the policy of the State to ensure the reliability of investors’ lease contracts to provide a stable environment for foreign investments,” the law read.

The law extends the term of foreign investors’ land leases to 99 years from the current 75, putting the country in line with policies of Singapore, Malaysia, and Indonesia.

Under the law, the President, upon the recommendation of the Fiscal Incentives Review Board (FIRB) or other agencies, can impose a shorter lease period for foreign investors in sectors considered as “critical infrastructure” in the interest of national security.

The law allows long-term land lease for “the establishment of industrial estates, factories, assembly or processing plants, agro-industrial enterprises, land development for industrial or commercial use, tourism, agriculture, agro-forestry, ecological conservation and other similar priority productive endeavors.”

In the case of tourism projects, the 99-year lease is limited to projects with an investment of not less than $5 million, 70% of which will be invested in the project within three years.

Under the law, foreign investors that violate the lease contracts face a fine of between P1 million to P10 million or imprisonment of up to six years.

The lease contract can be terminated if the foreign investor fails to start the investment project within three years of the signing.

This measure was a priority by Legislative-Executive Development Advisory Council for passage before the 19th Congress adjourned.

Mr. Marcos signed the law on Sept. 3, but a copy of the law was uploaded on the Official Gazette website on Sept. 4.

The law takes effect 15 days after it has been published in the Official Gazette or a newspaper of general circulation.

Source: Business World