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

Manila ranks 5th globally in Q2 luxury home price growth

Prime residential prices in Manila rose by 9.1% year on year in the second quarter, ranking the Philippine capital fifth among global cities for price growth, according to the latest edition of Knight Frank’s Prime Global Cities Index (PGCI).

This represents a slowdown from the 26% year-on-year surge recorded in the same period last year, when Manila topped the global rankings.

The PGCI is a valuation-based index that monitors prime residential price movements in 46 cities worldwide, using data from Knight Frank’s global research network. It measures nominal prices in local currency.

Year on year, Manila’s prime residential price growth trailed only Seoul (25.2%), Tokyo (16.3%), Dubai (15.8%), and Bengaluru (10.2%), but outperformed Mumbai (8.7%), Bangkok (7.1%), Madrid (6.4%), Nairobi (5.6%), and Zurich (5.4%).

Manila’s prime residential prices grew faster in April-June than the 1.6% decline recorded in the first quarter.

Over the past five years, Manila ranked among the top markets in terms of real estate price growth at 77.5%, behind only Tokyo (120%), Dubai (107%), Seoul (80.9%), and Miami (80.3%).

Manila’s five-year price growth also outpaced that of Los Angeles (56%), Christchurch (43.9%), Gold Coast (34.2%), Shanghai (32.8%), and San Francisco (32.6%).

“Emerging hotspots like Manila and Christchurch highlight increasing investor appetite in secondary cities,” Knight Frank said.

“Asian cities continue to lead the rankings, but with less vigor than in previous quarters,” it added.

Manila’s prime residential prices also outpaced the 2.3% global price growth in the second quarter.

“We’re seeing a more fragmented market, with some European cities showing surprising strength while former high-flyers in Asia begin to level off,” Liam Bailey, global head of research at Knight Frank, was quoted as saying in the report.

Another analyst commenting on the report, Joey Roi H. Bondoc, director and head of research at Colliers Philippines, said strong demand for units amid limited supply may be helping support Manila’s prime residential market.

“The upper luxury, ultra-luxury segments continue to outperform other market segments, especially the mid-income segment, because the latter is very sensitive to mortgage rates,” he said.

“On the other hand, luxury buyers are awash with cash. If they don’t have the cash right now, probably they sell one or two of their units and then buy another luxury unit.”

The luxury residential segment — typically valued at P20 million and above — has only 3% remaining inventory of ready-for-occupancy units, far below the 32% inventory recorded in the lower middle-income segment, Colliers said in its Second Quarter Property Market Report.

“By prime residential prices, they may be referring to newly launched luxury condominiums in the Core Central Business Districts of Makati, BGC (Bonifacio Global City) and Ortigas. These constitute a very small percentage of the total condominium supply in the market, but are the highest priced units,” Roy Amado L. Golez, Jr., director of research and consultancy at Leechiu Property Consultants, said.

In the coming months, Mr. Bondoc expects more property developers to pivot toward the luxury residential segment.

“More developers will become more prudent when it comes to their launches, but they will cater to the luxury market… so, the share of luxury in the total new launches in Metro Manila will continue to increase,” he added.

“I would tend to think that inflation, interest rates and other factors such as financing and the sourcing of high-end luxury materials will continue to nudge pricing upwards,” Mr. Golez also said.

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Source: Business World

New mid-income condo launches unlikely in the next 3 to 4 years

It may take up to four years before launches of new middle-income residential condominium projects in Metro Manila begin picking up again, amid lingering oversupply in the market, according to real estate consultancy firm Cushman & Wakefield.

“Based on historical experience, it will take about three to four years before the market begins to react again and new launches will be announced,” Claro dG. Cordero, Jr., director and head of research, consulting and advisory services at Cushman & Wakefield, said at a news briefing.

The Metro Manila condominium market, particularly for the middle-income segment, continues to experience excess inventory, Cushman & Wakefield said.

“Prior to the pandemic, I think the annual launches were about, on average, 15,000 units a year from around 2005 up to 2020. After the pandemic, we noticed that the launches have gone down to about 5,000 [units] annually,” Mr. Cordero said.

In its first-quarter property market report, Cushman & Wakefield estimated there are around 450,000 units available in the middle-income and high-end segment.

Mr. Cordero said the high-end residential condominium segment has maintained its growth momentum, while noting an increasing demand for house and lot properties outside Metro Manila.

“For residential condominium markets, investors are shifting again towards high-end residential for capital appreciation, and rental yields have remained attractive in major central business districts like Makati, Ortigas, and Bonifacio Global City,” he said.

This year, Cushman & Wakefield said around 5,000 units will be added to the available supply in Metro Manila, covering middle-income to luxury residential segments.

Meanwhile, high vacancy rates persist in the office sector due to hybrid work schemes, policy changes and the exit of Philippine offshore gaming operators (POGO), Mr. Cordero said.

He said the Metro Manila office vacancy rate rose to 17.3% in the first quarter, from 16.5% in the same period a year ago.

The Metro Manila office sector has a consolidated stock of 9.83 million square meters (sq.m.), mostly Prime and Grade “A” facilities. About 69,200 sq.m. of new supply was added in the first quarter, Mr. Cordero said.

“We’re looking at again more than half a million square meters [of new supply] by end of 2025 mainly coming from Quezon City, Makati and Taguig,” he also said. “We’re looking at persistently high vacancy rates over the next few quarters.”

In the first three months of the year, headline rents averaged P987 per sq.m. per month — declining annually by 2.4% — reflecting pressures from excess supply in the market, Mr. Cordero said.

Despite a positive net absorption of 32,000 sq.m. year-to-date, demand remains “on the low side” due to office spaces that have remained vacant since the exit of POGOs.

“The overall absorption rate is positive, but some areas like Parañaque and Quezon City still have negative absorption figures because of the amount of spaces vacated by the POGO industry,” Mr. Cordero said.

To attract tenants, office developers in Metro Manila should consider offering flexible leasing strategies and fit-out incentives, Mr. Cordero said.

Meanwhile, the retail sector is expected to stay resilient, driven by the growing middle class as well as new commercial developments outside the Philippine capital.

“We’re seeing a significant supply of new shopping mall developments outside of Metro Manila primarily by SM [Prime Holdings, Inc.] and Ayala [Land, Inc.],” Mr. Cordero said.

These malls are expected to complement developers’ township projects in regional areas, he added.

Cushman & Wakefield said around 250,000 sq.m. of new retail spaces came online in the January-March period, while it expects a total of 345,000 sq.m. to be completed by end-2025.

Source: Business World