The cyclical slowdown in the Philippine real estate sector, which mirrors the experience at the onset of the global financial crisis in 2008, is nearing a tipping point, according to Cushman & Wakefield, a global commercial real estate services firm.
Cushman & Wakefield said the Philippine real estate market is experiencing unique challenges, shaped by unprecedented factors such as the global pandemic, geopolitical tensions and rapid technological advancements.
“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,” said Claro Cordero Jr., head of research, consulting and advisory services for the Philippines at Cushman & Wakefield.
Cushman & Wakefield said that in the office segment, it observed a decline in average Prime and Grade A office developments in Metro Manila for the fifth consecutive quarter. Average rental rates for office developments in CBD areas decreased by 2.9 percent year-on-year, while non-CBD areas experienced a more significant decline of 4.2 percent year-on-year.
“Overall, vacancy rates are expected to stabilize around 17 percent to 18 percent in 2025,” it said.
It said that in the residential segment, the disparity between high-end and mid-end segments has become more pronounced. It said that while the oversupply of condominiums was concentrated in the high-end market during the Asian financial crisis, excess inventory is now focused on the mid-end market, which faces various issues.
“The mid-end market faces a critical supply-demand mismatch, as buyers now prefer larger units, a substantial turnaround from the market-acceptable development density following the Asian financial crisis, while available studio types are often less than 25.0 square meters. Additionally, unrealistic, and highly inflated selling prices contribute to the market’s challenges,” Cordero said.
The annual average completion rate for residential condominiums over the last decade has been 25,000 units, down from 35,000 units pre-pandemic. In 2024, completions breached 10,000 units, after averaging 6,500 units from 2000 to 2023.
Metro Manila has about 450,000 mid-end and high-end residential units, with around 8 percent unsold. Outside Metro Manila, there are about 250,000 completed units, where unsold inventory is lower at around 5 percent.
