Expanding economy pump-primes PH property
The sustained pace of economic expansion makes the Philippines one of Southeast Asia’s bright spots.
In 2024, the Philippine economy expanded by 5.6 percent, slightly faster than the 5.5 percent growth in 2023 but slower than the government-projected target of between 6 and 6.5 percent. The country was the second fastest growing economy in Southeast Asia last year, only trumped by Vietnam’s 7.1 percent gross domestic product (GDP) growth.
Colliers is optimistic that sustained growth in 2025 will continue to help lift the property sector, especially the Metro Manila residential and office segments that continue to reel from the adverse impacts of the pandemic and the exodus of Philippine offshore gaming operators (POGOs).
In our view, the emergence of more sustainable demand drivers for office and residential sectors, buoyed by a constantly expanding economy, bodes well for Philippine property.
Unchanged BSP rates
The Bangko Sentral ng Pilipinas (BSP) decided to keep the policy rate at 5.75 percent in February 2025. This defied analysts’ expectations as majority predicted a 25-basis points (bps) rate cut amid slowing economic growth and easing inflation.
In 2024, the BSP slashed policy rates by a total of 75 bps and is expected to reduce rates by another 50 bps in 2025.
Average inflation settled at 3.2 percent in 2024, slower than the 6 percent inflation a year ago. In 2025, inflation is projected to reach 3.5 percent.
Colliers believes stable inflation and the further easing of interest rates should positively impact the property market, especially the pre-selling condominium sector, which experienced its lowest number of launches and take-up on record in 2024. Lower interest rates should also help raise appetite for more residential projects, especially for horizontal developments outside Metro Manila.
Shifting office market
In 2024, the Metro Manila office market posted its first negative net take-up since 2021, as space surrenders outpaced demand.
While significant space surrenders were recorded due to the POGO exodus and non-renewal of pre-pandemic leases, expansions from traditional and outsourcing occupants helped mitigate the impact, preventing a sharper decline. Despite limited completions during the year, vacancy still reached a record high and is expected to peak further in 2025 due to carryovers.
Provincial office markets remained resilient, with sustained transaction volumes and a growing number of emerging locations gaining traction, signaling a shift in occupier demand beyond Metro Manila.
Meanwhile, there are also opportunities for tenants to scout for higher quality spaces offered at discounted rates. New high-profile locators including artificial intelligence (AI) software engineering companies are taking up space in Metro Manila, helping fill the void left by POGOs.
Colliers urges occupiers to capitalize on current market conditions to secure favorable lease terms. Landlords, meanwhile, should enhance the appeal of their spaces—especially those vacated by POGOs—to stay competitive in a tenant-favorable market.
Debunking the residential doom and gloom
The ready-for-occupancy (RFO) condominium market in Metro Manila continues to face challenges. It is, however, important to highlight the fact that not all Metro Manila submarkets are affected by the overhang.
To address the oversupply issue, developers in Metro Manila continue to offer more attractive payment terms for pre-selling and RFO projects.
In our view, the promos offered by developers can be complemented by lower mortgage rates, as a result of lower interest rates. Rate cuts are a potential tailwind to the Metro Manila condominium market.
Colliers believes geographic diversification is pivotal especially now that we are recording a lukewarm appetite in the capital region. Resort-themed projects in Batangas, Benguet, Davao, and Cebu continue to perform well, while some mid-income vertical projects outside Metro Manila are nearly sold out.
Lastly, property firms should highlight the proximity of their residential developments to game-changing infrastructure projects due to be completed in Metro Manila, such as the subway. These big-ticket public projects should play an important role in stoking demand in the capital region beyond 2025.
Email the author at Joey.bondoc@colliers.com
