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

Can quality appliances contribute to higher rental yield?

Homes in the rental sector are more likely to have old and inefficient appliances for tenants to use in order to cut costs.

However, the appliances and lifestyle perks available within your property can allow you to generate a higher yield whilst broadening the properties appeal.

In a recent survey of landlords, it found that on average, landlords believed that premium appliances would help generate a 4% increase in rental income per month.

Most prospective tenants do not own their own appliances as these can not easily be taken from property to property (especially fridge freezers), therefore, tenants are likely to pay higher monthly rent for quality appliances that are readily available within the property.

Quality appliances can contribute to higher rental yield in several ways:

1. Attracting tenants: Upgrading appliances to high-quality, modern ones can make your rental property more appealing to potential tenants. People are often willing to pay higher rents for properties that offer the convenience, energy efficiency, and reliability that come with quality appliances.

2. Competitive advantage: In a competitive rental market, having superior appliances can give your property an edge over others. Tenants may be willing to pay a premium to rent a place with better appliances, especially if they are durable, low-maintenance, and offer desirable features.

3. Longer tenancies: When tenants have access to quality appliances, they are less likely to experience frequent breakdowns or inefficiencies. This can result in a more positive rental experience and may encourage tenants to stay longer. Longer tenancies mean reduced turnover costs and a steady rental income stream, ultimately contributing to higher rental yield.

4. Positive word-of-mouth and reviews: Satisfied tenants are more likely to recommend your property to others or leave positive online reviews. This can lead to increased demand for your rental property, allowing you to attract higher-quality tenants who are willing to pay higher rents.

5. Energy efficiency and cost savings: High-quality appliances often come with energy-efficient features, such as ENERGY STAR ratings. Energy-efficient appliances can help reduce utility bills, which can be attractive to tenants who value cost savings. Lower utility costs can make your property more appealing, potentially allowing you to charge a higher rent and increase your rental yield.