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  • Writer's pictureZiggurat Realestatecorp

Boosting PHL property amid a skidding economy

The Philippine economy grew slower than expected in the second quarter of 2023. With the subpar expansion (4.3%), meeting the growth target of at least 6% in 2023 will likely be a challenge.

Colliers Philippines believes that 2022 marked the gradual recovery of the Philippine property after a disruptive period (2020 and 2021). In our view, various property segments have varied degrees of recovery and the government’s pump-priming for the remainder of 2023 will play a crucial role in improving the rebound prospects of office, residential, and hotel sectors.

The Philippine property is recovering but the pace of growth for the remainder of the year is likely to be stifled by dismal economic expansion in the second quarter of 2023.

It will be interesting to see how domestic and foreign economic headwinds will shape the Philippine property sector’s growth and evolution beyond 2023.


This year, we expect the completion of 4,920 new residential units before picking up in 2024, where we see the delivery of 9,620 units — the highest new supply since 2019.

By end-2024, Colliers projects Metro Manila’s condominium stock to reach 165,700 units, with the Bay Area likely overtaking Fort Bonifacio as the biggest residential hub in the capital region in terms of condominium supply.

In our view, the slower condominium completion coupled by the improvement in residential leasing will partly ease vacancy in 2023.

We have seen returning expatriates in the country driving take-up in the secondary residential market particularly in Makati CBD, Rockwell Center, Ortigas Center, and Fort Bonifacio. By end-2023, we forecast vacancy to drop to 17.0% from 17.6% in 2022 and this is likely to raise residential rents and prices.

We see the improving business and consumer sentiment, continued inflow of overseas Filipino workers’ remittances, as well as stabilizing interest rates likely supporting pre-selling and secondary residential demand across Metro Manila.

We are seeing an aggressive stance being taken by developers in launching horizontal projects outside Metro Manila. This development path is likely to continue as property firms search for new sites viable for more house-and-lot and lot-only projects.


Latest data from the Department of Tourism showed that international visitors to the country reached 2.7 million as of the first half of 2023, up 232% from the 814,141 foreign arrivals in the first half of 2022.

The Tourism department expects tourist arrivals to reach 4.8 million in 2023. In 2019, foreign arrivals in the country reached a record high of 8.3 million.

As of the end of the first half of 2023, average hotel occupancy in the capital region reached 61%, up from 55% in the first half of 2022 and 25% in the first half of 2020. Colliers expects hotel occupancy to breach 65% by the end of 2023 partly driven by holiday spending as well as increased meetings, incentives, conferences and exhibitions (MICE) activities.

The entry of more foreign visitors should further propel hotel occupancy across the Philippines, providing impetus for developers to expand their leisure foothold across the country.

In the first half of 2023, average daily rates (ADRs) grew by 5.2%. Five-star hotels continued to record the fastest growth in ADRs, indicative of the return of business travelers and in-person MICE events. Colliers retains its forecast of a 6% ADR growth in 2023. We believe that growth in ADRs in 2023 is likely to be tempered by the substantial number of hotel rooms due for completion in the second half of 2023.


Metro Manila office transactions in the first half of 2023 reached 306,000 square meters (3.3 million square feet), down 9% from the 324,000 sq.m. (3.5 million sq.ft.) recorded a year ago.

By the end of 2023, we expect new supply to reach 668,400 sq.m. We project the Ortigas central business district, Fort Bonifacio and Quezon City to cover more than half of the new supply.

From 2023 to 2025, we expect the annual delivery of 492,400 sq.m. (5.3 million sq.ft.) of new office space. This is half of the nearly 1 million sq.m. (10.8 million sq.ft.) delivered annually from 2017 to 2019, a period wherein completion and demand was positively influenced by the Philippine Offshore Gaming Operators sector.

The vacancy rate reached 18.4% as of the end of the second quarter. By end-2023, we expect vacancy to reach 21.2%. We attribute the potential rise in the vacancy rate to the substantial new supply likely to be completed in the second half, which we estimate at about 538,900 sq.m. (5.8 million sq. ft.).

While vacated spaces across Metro Manila have been on a decline, some occupants continue to rationalize office space due to various reasons such as non-renewal, pre-termination, and rightsizing.

Average Metro Manila office rents were stable in the second quarter of 2023. We have observed that submarkets with sustained take-up saw a recovery in rents.

However, business districts with substantial supply coming online in the second half 2023 as well as those with double-digit vacancies are likely to see further decline in rents.

The good news is that we are recording office space transactions even outside Metro Manila. At Colliers, we always recommend that developers continue to be on the lookout for opportunities to develop more office towers in major outsourcing hubs outside Metro Manila including Iloilo.

Property firms should further explore development opportunities in key growth areas and maximize the availability of skilled manpower and topnotch infrastructure.


Given a sanguine macroeconomic and consumer confidence outlook, Colliers believes that the retail sector will continue to grow, especially as the Philippine economy is primarily led by household spending. Malls continue to record high foot traffic especially during weekends and experiential retail is starting to recover lost ground.

Lease rates are starting to increase, that’s why retailers should be quick in locking in prime spaces in major business districts — from north to south of Metro Manila.

Meanwhile, given the growing interest from foreign retailers, Colliers recommends that mall operators seize the demand from these firms by taking into account their size and fit out requirements.

Online and offline shopping will continue to complement each other, which should compel mall operators and retailers to ramp up their omnichannel strategies.

Innovation will be the name of the game for several retailers, especially those that are trying to sustain heavy footfall and substantial level of spending per capita. Reactivation of activity and event centers is a must, particularly now that people are willing to go out and spend and participate in various mall events.

There is no doubt Filipino shoppers are back. Brick-and-mortar mall spaces are regaining their relevance as the Filipinos’ de facto public spaces, but online shopping remains in-demand. Hence, distribution points for large and popular retailers should be strategically located within and outside Metro Manila to cater to discerning buyers, especially those who prefer deliveries within 24 hours.

Interest in experiential retail is reverting to pre-pandemic level and presents a perfect opportunity for retailers and mall operators to diversify, differentiate, and eventually corner a greater fraction of the Filipino consumer base.

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