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

Manila continues to slump in Smart City Index

Manila fell four places to 125th out of 146 cities in the latest edition of the Smart City Index. This was the Philippine capital’s lowest ranking thus far according to Switzerland-based International Institute for Management Development (IMD).

The Smart City Index measures and rates each city’s level of technological application to the five key areas: health and safety, mobility, activities, opportunity, and governance.

Manila Smart Index profile 2025

Manila_2025.pdf

Download PDF • 284KB

Source: Business World

Key trends shaping the 2025 office market

The Metro Manila office market navigated a challenging landscape in 2024, marked by high vacancy rates, shifting occupier strategies, and global economic uncertainties. As 2025 begins, key trends are emerging that could redefine demand dynamics, presenting both challenges and opportunities for occupiers and landlords alike.

US ELECTION SLOWS DOWN OFFICE LEASING IN Q4 2024

Metro Manila’s office market experienced a decline in transaction activity in the fourth quarter (Q4) of 2024, with total demand dropping to 143,000 square meters (sq.m.) from 192,000 sq.m. in the previous quarter. Colliers’ historical data show that demand typically dips by 30% during US election periods as occupiers delay leasing decisions, but rebounds by 40% in the following months as market confidence stabilizes.

Despite the temporary dip, expansions remained strong, signaling businesses’ confidence in the country. In 2024, expansions accounted for 56% of known transaction motivations, while 44% were relocations — primarily driven by cost-efficiency strategies and flight-to-quality movements. Traditional firms continued to be the primary demand driver, followed by third-party outsourcing (3PO) firms and shared services providers. Government agencies played a key role in traditional office space demand, accounting for 27% of total take-up.

The submarket dynamics in Metro Manila highlight the resilience of key business districts. Among Metro Manila’s submarkets, the Bay Area remained the most active, capturing 23% of total transactions, followed by Fort Bonifacio (18%) and Quezon City (17%). Key leasing transactions in the Bay Area were from government offices, while major sign-ups from multinational firms were seen in Fort Bonifacio, and expansions of IT-BPM firms were recorded in Quezon City.

POGO EXODUS’ IMPACT TO LINGER IN 2025

The lingering effects of the Philippine Offshore Gaming Operator (POGO) exodus weighed on the market, pushing Metro Manila into its first negative net take-up territory since 2021. In 2024, POGOs vacated 260,000 sq.m., and without the ban, net take-up could have remained positive at 215,000 sq.m.

The impact is most pronounced in POGO-exposed submarkets, particularly the Bay Area, Alabang, and Makati Fringe, where vacancy rates remain elevated. With the government’s continued crackdown on illegal POGOs, surrenders from these spaces will likely drive further increases in vacancy rates.

Despite these challenges, demand from other sectors has helped cushion the impact, with traditional firms, 3POs, and government agencies absorbing space. While the effects of the POGO exit will linger, ongoing transactions have prevented a worst-case scenario.

PROVINCIAL DEMAND REMAINS STRONG, DIVERSIFYING MARKET OPPORTUNITIES

Beyond Metro Manila, provincial office markets saw sustained demand, particularly from outsourcing firms. Cebu and Pampanga remained the top locations for provincial transactions, though Cebu recorded a year-on-year drop in volume — signaling possible market saturation of third-party outsourcing firms.

However, emerging office destinations such as Davao, Bacolod, Batangas, and Bohol saw a surge in demand, averaging a threefold increase in year-on-year transaction volume. Notably, some BPO players adapted to supply gaps by securing non-traditional spaces, such as Sagility’s lease within the redeveloped Tagbilaran Airport project. Additionally, newly built office buildings accounted for 60% of leasing activity, highlighting the need for high-quality, BPO-grade office spaces.

To capitalize on this trend, developers are encouraged to explore expansion in cities with limited office supply. Major developers such as Robinsons Land and Megaworld are already pivoting toward provincial growth with key projects in Iloilo, Bacolod, Bulacan, Davao, and Dumaguete. As more firms consider decentralizing operations, having high-quality office spaces will be critical in ensuring sustainable provincial market growth and attracting long-term occupiers.

WHAT TO EXPECT IN 2025

The office market is expected to remain tenant-leaning in 2025, as high vacancy rates persist due to non-renewals and carryovers from delayed construction of office buildings. However, early indicators from our Q1 2025 data suggest renewed leasing activity — particularly from 3PO firms in both Metro Manila and provincial locations — signaling a rebound in office demand.

Global economic conditions could further bolster the Philippines’ office market. With rising costs in key international markets, outsourcing remains a cost-effective strategy for multinational companies. The recent US tariff policies, as highlighted in our previous write-up, are expected to place additional cost pressures on US firms, making offshore solutions in the Philippines even more attractive. This trend could drive increased demand for office space, particularly from 3POs and shared services firms looking to expand their footprint in cost-efficient locations.

The passage of the CREATE MORE Act — particularly its provision allowing Registered Business Enterprises (RBEs) to implement up to 50% work-from-home (WFH) arrangements—will also play a crucial role in shaping office demand. In the short term, this policy may have varied effects: some firms may rationalize their office footprint, while others may see little to no change in their space needs as they are already compliant with the onsite requirement. However, in the long term, the clarity on hybrid work policies provides occupiers with a stable regulatory framework — reducing uncertainty and allowing companies to make more confident real estate decisions.

For tenants, current market conditions present an opportunity to secure favorable deals, while landlords must enhance their offerings to remain competitive. Landlords in the Bay Area, Alabang, and Makati Fringe — particularly those with aging buildings and spaces previously occupied by POGOs — will need to implement refurbishments, offer tenant improvement allowances, and introduce flexible lease structures to attract occupiers and mitigate vacancy risks.

Source: Business World