Vietnam still enjoys cost advantage in furniture

The 17% tariff the US is poised to charge Philippine goods, while favorable compared to rest of the region, is not enough to overcome Vietnam’s cost advantage in furniture, the Chamber of Furniture Industries of the Philippines (CFIP) said.

CFIP Director General Ajun L. Valenzuela said that the Vietnam price advantage over equivalent Philippine goods is about 40%.

“Vietnam’s prices are much cheaper,” he said in a phone interview, adding: “our price difference with Vietnam is around 40%.”

Vietnam’s furniture exports totaled $16 billion in 2024, against Philippine exports of $200 million.

Vietnamese goods will be charged a 46% tariff starting July if it does not negotiate more favorable terms.

The tariff differential “is also good for us because it will make our prices at par with the Vietnam price, but it is not a solution,” he added.

The so-called reciprocal tariffs imposed on US trading partners announced in early April have been suspended for 90 days. In the interim, the US will charge most trading partners a 10% baseline rate.

According to Mr. Valenzuela, the Philippines still has an opportunity “to attract US buyers seeking alternatives to Vietnamese suppliers.”

“We can rely on our strengths: the unique craftsmanship, the indigenous materials, and the reputation or quality… especially in niche and premium segments,” he added.

The US is the largest export destination of Philippine furniture, accounting for $99 million, or 49.7% of the total. The other top markets include the Netherlands, Japan, Germany, and France.

He said it is possible that Singapore, which was assigned a 10% reciprocal tariff, “may act as a re-export hub for Vietnamese furniture.”

“We know for a fact that Singapore is not a furniture manufacturing country, so they sourced before from China, and now they will be sourcing from Vietnam. So, it potentially dilutes the Philippines competitive edge if rules of origin are not strictly enforced,” he added.

“There is also a risk that Vietnamese and Chinese furniture, now less competitive in the US, could be redirected to the Philippines,” he said.

“This could lead to import flooding, increased competition, and downward pressure on prices here,” he added.

The Philippine cost disadvantage lies mainly in labor, he said.

“The Philippine average monthly manufacturing wage is significantly higher than Vietnam’s. In the Philippines it is $420-$450, while Vietnam’s labor cost is only $300-$350,” he said.

“Labor cost makes it difficult for Philippine producers to compete on price, especially for large-scale commoditized orders,” he added.

He said the industry is also disadvantaged in terms of scale, with Filipino small and medium enterprises unable to expand.

He said high electricity costs are also a concern for the furniture sector, along with the sourcing of raw materials.

“Vietnam benefits from proximity to large plantations and easy access to imported timber through established supply chains, while we rely on imported wood,” he said.

He said that the exemption of wood and wood products under the new US tariff regime will allow Philippine manufacturers to import sustainable and certified solid wood from the US at a very competitive rate.

He said establishing Philippine brands in the US market will require sustained investment in marketing, compliance, and relationship-building.

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

The cyclical nature of the property sector

Over the last few weeks, discussions surrounding Metro Manila’s condominium sector have taken on a more cautious tone.

Concerns over a reported oversupply and extended absorption periods—owing to elevated interest rates and the exit of Philippine offshore gaming operators, among other factors—have prompted questions on the real state and health of this industry.

A necessary recalibration

Another perspective, however, explains the current situation as a “necessary recalibration”—one that steers the market away from speculation and toward long term sustainability.

After years of rapid expansion especially before the pandemic, this shift now offers an opportunity to reshape Metro Manila’s condominium landscape into one that is more resilient, more demand-driven, and more aligned with real end-user needs.

“Metro Manila’s condo oversupply signals a maturing and stabilizing real estate market. Increased competition is driving developers to prioritize quality, innovation, and differentiation. Rather than a setback, this oversupply acts as a natural filter, eliminating weaker projects and raising industry standards,” said Prof. Enrique M. Soriano III, executive director of W+B Advisory Group.

The current landscape, in fact, presents a number of silver linings: developers are enhancing their offerings, buyers are getting better and more attuned options, and investors are finding new opportunities in a market that is moving toward a more balanced environment.

In a real estate cycle, downturns are not roadblocks but are “resets”. And those who understand the nuances of this transition will be best positioned to thrive in the market’s next phase.

Emerging districts like Bridgetowne are expected to see sustained demand in premium residential space.

Long term value

Amid this scenario, developers are now “moving away from speculative projects and toward sustainable, mixed-use, and community-driven developments that emphasize long term value,” Soriano said.

At the same time, high-net-worth individuals, affluent empty nesters, and discerning buyers are also increasingly favoring well-located, low density, and amenity-rich developments.

This highlights the continued demand for premium properties in key business districts like Makati CBD, Bonifacio Global City (BGC), Ortigas Center and Cebu City, as well as emerging districts like Bridgetowne and Parklinks—while reinforcing the notion that prime-location investments remain among the safest bets.

Janlo delos Reyes, head of Research and Strategic Consulting at JLL Philippines, concurs, pointing out that such markets—Makati CBD and BGC—are well ahead in terms of market maturity.

“These two districts have continued to register solid take-up and stable price growth despite current market conditions,” he said, adding that other areas in the metro, which recorded periods of significant growth in the past, may still be considered as maturing.

“Nonetheless, we can expect the situation to stabilize over the long run,” delos Reyes added.

No signs of panic, just patience

Sheila Lobien, CEO of Lobien Realty Group Inc., meanwhile assured that they haven’t observed prevalent “speculative behavior” in the market.

“We sense no widespread panic among developers and those who have condo mortgages. There is no flood of second-hand condos for sale, increase in real estate non-performing loans (NPLs) or surge in repossessed condo inventory for sale in the market,” she explained.

The situation is thus unlike overheated markets, where investors offload properties en masse at the first sign of trouble.

Lobien even waxed optimistic in saying that demand is expected to “recover once benchmark rates are possibly down to 5 percent, which is expected this year or early next year. Recovery in demand is just a matter of time.”

Major CBDs are seen to continue thriving.

From oversupply to opportunity

Similarly, another expert stressed that the perception of an oversupply overlooks a crucial point: that the Philippine real estate market is no longer driven purely by speculative investments but by strategic, end-user-oriented growth.

Andoy Beltran, VP and head of Business Development at First Metro Securities Brokerage Corp., said this is a sign of a more disciplined market.

Beltran explained that in a maturing market, sustainable price growth and rental yield stability take precedence over rapid boom-and-bust cycles.

“A maturing market is characterized by developers responding more strategically to demand rather than building just for the sake of launching. The current supply situation indicates a shift from speculative development to data-driven, end-user-focused projects. This means inventory is better aligned with real demand, reducing the risk of oversupply-driven price crashes,” he said.

Instead of viewing the present inventory levels as problematic, seasoned investors and developers should recognize this as a cycle in which strategic positioning and patience will ultimately yield long term gains.

“The key is recognizing the transition points—when stabilization turns into the next growth phase,” Beltran added.

Source: Inquirer