PROPERTY DEVELOPERS in Metro Manila are unable to adjust condominium prices as inflation and supply chain issues keep costs high, according to real estate services firm Cushman & Wakefield.
“Developers are grappling with increased input costs due to persistent global inflation and supply chain issues, exacerbated by geopolitical tensions. These factors hinder their ability to adjust prices quickly, leading to slower sales and impacting revenues,” Claro dG. Cordero, Jr., director and head of research, said in a statement on Tuesday.
The mid-end segment faces a supply-demand mismatch, mainly driven by elevated condominium prices. Buyers also prefer larger units, while available studio types are often less than 25 square meters (sq.m).
Condominium prices dropped by 9.4% year on year, reversing the 8.3% increase recorded last year and the 10.6% rise in the previous quarter, according to the latest data from the Philippine central bank.
“Until a balance is achieved between buyers’ expectations and developers’ pricing, excess inventory in the mid-end residential condominium sector will persist,” Mr. Cordero said.
The Metro Manila market has a total supply of 450,000 mid- and high-end condominium units, with around 8% remaining unsold.
Before the pandemic, the annual average completion rate for residential condominiums was 35,000 units. Over the past five years, it has declined to 25,000 units.
Outside Metro Manila, unsold inventory is lower at 5%, with about 250,000 completed units.
Dominant locations include Metro Cebu at 54%, followed by the Cavite-Laguna-Batangas corridor (24%), Metro Davao (13%), and Metro Iloilo (3%).
In the Metro Manila office market, vacancy rates are expected to stabilize at around 17–18% in 2025, Cushman & Wakefield said.
“Despite the return of office space from POGO (Philippine offshore gaming operators) companies, absorption rates have improved from pandemic lows but remain influenced by flexible work trends and corporate policies. On the other hand, some companies mandating a return to the office are positively impacting demand growth,” it said.
In central business districts (CBDs), average office rentals have declined by 2.9% annually, while rental rates in non-CBDs fell by 4.2%.
“This trend reflects a continued flight to quality, with CBD office developments benefiting from their superior finishes, amenities, and tenant mix,” Cushman & Wakefield said.
It also noted the rise of office spaces in non-CBDs, with 2.9 million sq.m. added outside Makati and Bonifacio Global City in the past decade. This was driven by flexible work trends and developments outside CBDs.
For retail, the property consultant noted an increase in redevelopments of existing spaces, incorporating additional features to enhance the shopping experience. Mid-end and high-end shopping malls have an average annual supply of about 376,000 sq.m., Cushman & Wakefield reported.
In the hotel segment, Cushman & Wakefield cited uneven regional recovery due to the untapped potential of many tourist destinations. It expects 1,600 additional keys in the mid-end and higher-end hotel and serviced residence segments this year.
However, it may take five years to reach the projected 70,000 keys due to construction delays.
Meanwhile, Cushman & Wakefield highlighted rising demand in the logistics and industrial sub-sector, driven by the growth of the digital economy.
However, it emphasized the need to improve the quality of logistics facilities to meet the demands of new occupiers. Challenges in the sector include achieving sustainability targets, clarifying restrictions related to data privacy laws, and addressing the high costs, availability, and viability of support utilities.
“Across all key Philippine real estate sub-sectors, the increased demand for higher-quality, well-located, and resilient developments is significantly shaping the future real estate landscape,” Mr. Cordero said. “Investors and tenants prioritize properties in prime locations with superior amenities and robust infrastructure.” — Beatriz Marie D. Cruz
