Outlook | Manila | 13 December 2022

Aiming for a strong finish

Philippine property recovery spills over into 2023

Insights & recommendations

The Philippine property market is likely to finish 2022 strong backed by improvement in office
deals across the country; higher supply and demand in the Metro Manila pre-selling condominium
market; a rebound in mall consumer traffic; and a rise in hotel occupancies and average daily rates
(ADRs). We see this optimism persisting through 2023 as recovery prospects are boosted by strong
macroeconomic fundamentals.
Office developers should take advantage of a rebound in leasing within and outside Metro Manila
by constructing new office towers and offering more flexible workspaces; residential developers
should launch new projects, integrating sustainable & green features, as the Metro Manila pre-
selling condominium market recovers; while mall operators should brace for more foreign and
local retailers as consumer confidence and foot traffic pick up.

Rental Market Vacancy Supply

Colliers projects positive net take-up in 2023.
We expect net absorption to reach 338,600
sq m, which should be supported by take-up 5.0% 20.5% 603,900 sq m
Office
from outsourcing and traditional* firms.

Colliers expects the delivery of 5,600 new

condominium units in 2023. About two-
Residential 2.0% 17.1% 5.600 units
thirds of which will be in the Bay Area.

We see the completion of 448,900 sq m of

new retail space in 2023. We expect rents to
recover following an improvement in retail 2.0% 17%
Retail 448,900 sq m
space absorption and mall consumer traffic.
Colliers projects the delivery of 112 hectares
of industrial supply in CALABA.1 We see
expanding manufacturing and logistics firms
Industrial 11.2% 6.0% 112 ha
supporting industrial space absorption.
Average Daily Occupancy Supply
Rate (ADR) Rate
Colliers sees the opening of more foreign-
branded hotels. In our view, the spike in
local and foreign tourists will likely result in
Hotel USD77 65% 3,900 rooms
improved occupancies and ADRs.
Source: Colliers. Note: USD1 to PHP59 as of the end of Q3 2022. 1 sq m = 10.76 sq ft. *Traditional occupiers include companies in various sectors
such as legal, engineering & construction, government agencies and flexible workspace operators. Industrial rental market refers to lease rates for
Standard Factory Buildings (SFB) in CALABA. † MICE = Meetings, Incentives, Conferences and Exhibitions; 1 CALABA – Cavite-Laguna-Batangas.

1
 Metro Manila supply, demand and vacancy
“Philippine property is undeniably on its way to
forecast (in sqm)
recovery. Lessons from Covid disruptions should
propel the market to greater heights. Now is the Supply Net Take Up Vacancy Rate (RHS)
right time to focus on innovation and 1,600,000 23.0%
differentiation-led recovery strategies especially
1,100,000 18.0%
as developers and investors continue to face a
precarious global economic and political 13.0%
600,000
environment.” 8.0%
Joey Roi Bondoc 100,000 3.0%
Associate Director, Research
-400,000 -2.0%
Office: Positive net take-up as
transactions further rise Source: Colliers

Colliers sees positive net take-up by the end of Share of each province to total provincial
2022. We forecast net absorption to reach office transactions, 9M 2022
140,000 sq metres (1.5 million sq feet), a
turnaround after negative net absorption Metro Manila
(−181,300 sq metres, −1.9 million sq feet) in 2020 Pampanga Laguna transactions,
9M 2022
and (−273,100 sq metres, − 2.9 million sq feet) in 14% 4%
2021). We adjusted our forecast to a 19.5% 496K sqm
vacancy in 2022 from our initial estimate of Cebu
Dumaguete
18.2% due to muted pre-leasing in upcoming Total
44% provincial
buildings. 3%
transactions,
9M 2022
In 2023, we see net take-up improving to 338,600 Davao Others
145K sqm
sq metres (3.6 million sq feet). However, we
28% 7%
expect vacancy to rise to about 20.5% as we Source: Colliers
project the delivery of 603,900 sq metres (6.5
million sq feet) of new supply. Vacancy in Metro Colliers recommends that occupiers take
Manila will remain supply-driven. advantage of the market conditions by
Average office rents in Metro Manila have implementing flight-to-quality measures as well
dropped by 35% since 2020. In our view, rents as securing early renewals in business districts
are likely to decline by another 10% in 2022 such as Ortigas CBD, Fort Bonifacio and Bay Area
before bottoming out in 2023. where quality new supply is available. From 2023
to 2026, we see the annual delivery of about
Colliers is starting to see rents stabilizing in
545,700 sq metres (5.9 million sq feet) of new
submarkets with declining vacancies such as Fort
office space. Landlords should continue
Bonifacio and Makati CBD. Meanwhile,
providing concessions (e.g. delayed escalations,
submarkets with significant amount of new
extended fit-out) to attract new occupants and
supply and muted take-up are likely to see a
retain existing ones amid the completion of
further decline in rents in the next 12 months.
more options in the market.
Metro Manila supply forecast per submarket
Submarket End 2021 2022F 2023F 2024F 2025F 2026F End 2026F
Makati CBD 3,391,200 74K 39K 3,505,000
Fort Bonifacio 2,424,500 47K 85K 193K 25K 42K 2,816,900
Ortigas Center 2,075,500 144K 129K 58K 54K 2,460,900
Quezon City 1,533,200 50K 162K 279K 172K 2,195,400
Bay Area 1,157,700 161K 44K 26K 114K 17K 1,519,500
Alabang 788,400 78K 16K 882,800
Makati Fringe 569,800 142K 77K 84K 871,800
Ortigas Fringe 606,400 22K 90K 33K 53K 803,900
Others 395,400 66K 107K 163K 60K 61K 852,400
Metro Manila 12,942,200 783,900 603,900 570,100 510,900 498,000 15,909,000
Source: Colliers ; Note: in sqm

2
Colliers is optimistic of greater office space By the end of 2024, we project condominium
absorption in the provinces as occupiers revisit stock in major business districts in Metro Manila
their business continuity plans (BCP) and expand to reach 166,400 units, a 17% increase from
operations by tapping provincial talent. 142,200 units in 2021. The Bay Area will likely
overtake Fort Bonifacio as the biggest
Developers are keen on capturing this demand condominium market in the capital region in
outside the capital region by building more office 2024, with 44,100 units or 27% of stock during
towers. Among key areas with substantial new the period.
supply up to 2024 include Cebu, Bacolod, Iloilo,
and Davao. Historical condominium completions
Office market overview (H1 2022) (2016 – 2024F)
Metro Manila Bacolod 20,000
15.9 K
13.4Mn 155,300
Total stock Total stock 15,000
sqm sqm 11.7 K 11.2 K
10.1 K
8.7 K 8.5 K
Vacancy 17.7% Vacancy 22.5% 10,000
5.6 K
4.4 K
Ave. new supply 668,900 Ave. new supply 23,200 5,000 3.4 K
(2022-2024) sqm (2022-2024) sqm

0
Iloilo Cebu

2016

2017

2018

2019

2020

2021

2022F

2023F

2024F
189,800 1.3Mn
Total stock Total stock
sqm sqm
Source: Colliers
Vacancy 27.7%
Vacancy 7.7%
We expect vacancy in the secondary market to
Ave. new supply 38,200 Ave. new supply 81,800 drop to 17.1% in 2023 from 17.6% in 2022.
(2022-2024) sqm (2022-2024) sqm
Residential leasing should be supported by
Davao
Total stock
357,800 demand from expatriates and local employees
sqm
looking for condominium units near their
Vacancy 14.1%
workplaces.
Ave. new supply (2022- 6,100
Source: Colliers 2024) sqm Residential vacancy (2016 – 2023F)
Note: Vacancy figures are as of Q2 2022

Residential: More integrated

20.0%
2020: 15.6%

communities and sustainable

15.0%
2023F: 17.1%
10.0%
features 5.0%
2019: 11.0% Covid-19

Colliers sees an annual average completion of 0.0%

8,100 units from 2022 to 2024, from the 7,800
2022F

2023F
2016

2017

2018

2019

2020

2021

units completed yearly from 2019 to 2021.

Source: Colliers
Metro Manila residential stock forecast, end of 2021 and 2024 (units)
End of 2021 End of 2024 % Change
1 Bay Area 30,260 44,140 7
45.9%
4,880 6,370
2 Alabang 30.5%
5
Fort Bonifacio 40,320 43,840 8.7%
4
3
Rockwell Center 5,270 5,830 10.6% 6
4
Ortigas Center 18,730 21,760 16.1%
3
5 Makati CBD 1
28,550 29,680 4.0%
6 Araneta City 4,550 5,140 13.0%
7 Others 9,630 9,630 0.0%
Total 142,190 166,390 17.0%
Note: Google Maps estimated private vehicle travel time to Makati: Bay Area-17 min, Alabang-24 min, Fort 2
Bonifacio-14 min, Rockwell Center-9 min, Ortigas Center-15 min, Araneta Center-23 min Source: Colliers

3
Meanwhile, Colliers saw a pick-up in demand in Colliers also encourages developers to assess
the pre-selling condominium market in Metro the viability of launching more master-planned
Manila. As of 9M 2022, about 14,900 units were communities to take advantage of the
sold in the capital region, already outpacing full- government’s infrastructure projects. In the next
year 2021 figures of 12,400 units. 12 to 36 months, we see the completion of big-
ticket projects including MRT-7, LRT-1 Cavite
While the mid-income market (PHP3.2 million to
Extension, North-South Commuter Railway and
PHP6.0 million or USD54,200 to USD101,700)
Cavite-Laguna Expressway (CALAX) raising the
continued to dominate total take-up, we
attractiveness of key provinces in Central and
observed an increased demand for luxury
Southern Luzon for more township
projects (PHP8 million and above or USD135,600
developments.
and above). The segment accounted for about
28% of total take-up in 9M 2022, up from −1.6%* Demand drivers for integrated communities
in 9M 2021. In our view, this market will remain
resilient amid the rising interest and mortgage Improving infrastructure
rates. Colliers believes that demand for luxury
and ultra-luxury projects will likely be sustained Popularity of live-work-play lifestyle
as investors bank on these properties’ potential
for capital appreciation. End-users seeking convenience
Breakdown of take-up, 9M 2021 vs. 9M 2022
Source: Colliers
Economic Affordable Mid-income Upscale Luxury
Retail: Revenge spending to
extend into 2023
28%
80%
48%
11%
Major mall developers have been reporting that
35%
30% consumer traffic has now reached between 85%-
40%
95% of pre-Covid levels in Q3 2022 from only
26%
-0.4%
7% -0.1% 40% a year ago. In 2023, we see more retailers
-2%
9M 2021 9M 2022 (foreign and local) taking up physical mall space
-20%
Source: Colliers
to take advantage of rising consumer traffic and
anticipated increase in purchasing power.
We also recommend that developers highlight
amenities such as open spaces and green areas. In 2022, several foreign retailers opened shop
Based on our Q3 2022 Residential Survey, about across malls in Metro Manila. These include The
90% of respondents believe that having green Editor’s Market and Panda Express in SM Mall of
and sustainable features are important in Asia, Randy’s Donuts in Robinsons Magnolia, Clé
purchasing a residential unit. Moving forward, de Peau Beauté in Greenbelt 5, 6ixty8ight in SM
Colliers sees more developers securing green City Grand Central and Drunk Elephant in SM
building certifications for their residential Makati.
towers.3 We believe that this will play a crucial Metro Manila retail rents forecast (2012-2023F)
role in future-proofing residential projects.
How important are green and sustainable features 10% 20.0%
5% 2% 10.0%
when purchasing a residential development? 1%
0.0%
Critical, 0%
17% -10.0%
must be present -5%
-20.0%
40% Important, -10% -5%
-30.0%
a decision factor
-15% -10% -40.0%
41% Nice to have,
Not a
Unimportant, requirement
3%
not a factor
Rental Growth (LHS) Consumer Confidence (RHS)

Source: Colliers Q3 2022 Residential Survey Source: Colliers

*Negative percentage denotes that back-outs are higher than take-up

during the period. 3DMCI Homes to develop upscale condo in Makati;

Filigree launches Two Botanika project. 4
Colliers sees the approval of the amendments to
the Retail Trade Liberalization Act (RTLA) paving
the way for the entry more foreign retailers in
the country. Based on our mall scans, the Food
and Beverage (F&B) segment will account for
50% of the upcoming retailers followed by
fashion accessories and beauty & health at 27%.
Colliers recommends that mall operators
reactivate their event spaces or activity centres
by organizing events such as trade fairs, exhibits
and concerts to attract more mallgoers. F&B and
clothing & footwear retailers should also
consider opening pop-up stores especially those
testing the feasibility of the Philippine retail
market. We also encourage mall operators and
retailers to continue implementing regular
sanitation and other health and safety protocols
especially in high-density retail spaces.
Share of upcoming retailers in Metro Manila
3%
3% 2%
4%
4%
6%
10% 50%
17%
Food & Beverage Fashion Accessories
Beauty/Health/Accessories Hobby /Gifts / Specialty Ref.
Fashion Others
Services Home
Culture / Art / Entertainment
Source: Colliers
In 2023, we see vacancy marginally rising to 17%
from a projected 16% vacancy in 2022 due to the
substantial delivery of 448,900 sq metres (4.8
million sq feet) of new supply. Despite record-
high new supply, we expect greater retail space
absorption from brick-and-mortar shops
following the improved consumer traffic as
reported by mall operators and consumer
confidence from the Philippine central bank.
Meanwhile, Fitch Solutions projects household
consumption to grow at an average of 5.1%
annually from 2023 to 2026. Fitch Solutions also
expects household incomes to outperform
inflation in 2023, "which will ensure real income
growth and greater potential for consumer
spending.“4
Colliers encourages developers to reassess the
ideal sizes of upcoming retail developments as
4Philippines 2023
Consumer Outlook: Easing Inflation Will Prop Up
Robust Growth In The Philippines (fitchsolutions.com)
they welcome more consumers back to their
properties. From 2024 to 2026, Colliers sees the
completion of 62,000 sq metres (667,100 sq feet)
of new retail space annually, only a fifth of the
annual delivery of 327,200 sq metres (3.5 million
sq feet) of new supply that we recorded from
2017 to 2019.
Colliers believes that online shopping will remain
popular as Filipinos continue to put a premium
on convenience. In our view, this will likely
complement brick-and-mortar shopping which
we see receiving a boost from the dropping of
mask mandates. Colliers encourages mall
operators and retailers to further strengthen
their omni channel strategies to support brick-
and-click shopping.
Metro Manila Retail supply and vacancy
forecast, (2012–2023F)
New Supply Vacancy at Year-End (RHS)
20.0%
400,000
10.0%
200,000
- 0.0%
2022F
2023F
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: Colliers
Leisure: Domestic tourists to
jumpstart recovery, more
foreign brands to enter PH
Data from the Department of Tourism (DOT)
show that foreign arrivals as of November 14,
2022, reached 2.0 million, already exceeding the
full year target of 1.7 million arrivals. The United
States, South Korea and Australia were the top
source markets during the period. Meanwhile,
hotel occupancies in the capital region as of H1
2022 reached 47% from 44% in H2 2021 as we
saw the return of business travel and
resumption of MICE activities.
The DOT also reported that visitor arrivals from
February to September 2022 generated
PHP100.7 billion (USD1.7 billion) in visitor
spending, higher than the PHP4.94 billion
(USD8.4 million) a year ago.5
5PIA- PHL visitor arrivals reach 2M; tourism revenue hit 100B – DOT
Chief
5
Hotel occupancy rate and foreign arrivals Metro Manila hotel new supply and forecast
(2012-2022F) (2017 – 2024F)
Visitor Arrivals (LHS) Average Occupancy (RHS)
4,000
10M 100%
3,000
5M 50%
2,000

0M 0% 1,000

2022F*
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
0
2017 2018 2019 2020 2021 2022 2023 2024
Source: Colliers; Department of Tourism
Note: Arrivals are as of 10M 2022 Source: Colliers

Meanwhile, data from the Philippine Statistics Selected upcoming hotels from 2023 to 2025
Authority (PSA) show that the tourism sector’s
share to the country’s economy reached 5.2% in
• Westin Manila Quezon City • Solaire North
2021 from 5.1% in 2020. Domestic tourism • Ibis Styles Hotel
Sonata Palace
expenditures also reached PHP783 billion Hotel Ortigas CBD
(USD13.2 billion), up 39% YOY after reporting • Mandarin
Makati CBD
37.3 million trips in 2021 (from 27 million in Oriental
2020). DOT is optimistic that the removal of mask Bay Area • Seda One Ayala
• Seda Bay Area
mandates will likely lure more travelers to visit • Ascott DD Meridian Fort Bonifacio
Park • Red Planet The
the country. In our view, this is likely to stoke Fort
• Grand Westside
demand for hotels across the country and help • Hotel 101 Fort
Hotel
raise occupancies. However, the Philippine Hotel
Source: Colliers
Owners Association (PHOA) is “cautiously
optimistic” in 2023 as rising inflation, airfares as Colliers sees Average Daily Rates (ADRs) rising by
well as global geopolitical tensions are likely to about 15% in 2022 after recording a cumulative
affect customers’ travel decisions. 6 drop of 20% in 2020 and 2021. ADRs are likely to
continue to improve in 2023 following the
In 2023, Colliers projects the completion of 3,900
projected rise in local and foreign tourists.
rooms, a record-high as developers anticipate
the projected recovery in global travel. From The ADRs of selected high-end resorts have
2023 to 2025, Colliers expects the annual either held firm or increased HOH. Colliers
delivery of 2,120 rooms, higher than the 720 attributes this to continued revenge travel across
rooms completed yearly from 2020 to 2022. We the country. In our view, the increase in rates is
expect more foreign-branded hotels opening in likely to be sustained as the country attracts
the next 12 to 36 months. From 2023 to 2025, more international travelers, especially the long-
about 44% of the new supply are foreign brands haul and high-spending ones.
and are likely to open in the Bay Area, Makati High-end resorts daily rates
CBD and Ortigas CBD.
Hotel Name H1 2022 H2 2022
What will drive the demand for foreign-
branded hotels Amanpulo Resort USD1,430 USD1,500
Crimson Hotel
Recovery in foreign and local tourists PHP10,200 PHP10,350
Boracay
Shangri-la
More modern airports PHP22,325 PHP22,325
Boracay
Shangri-la Mactan PHP12,600 PHP13,500
Growing propensity to spend on leisure Note: USD1 = PHP59 as of the end of Q3 2022 ; USD1 =
PHP54 as of the end of Q2 2022
6Hotels balancing value, affordability as inflation weighs on travel
plans
6
Industrial: New industrial In our view, data centers are potential industrial
locators beyond 2022. Industrial parks are ideal
parks and facilities to support locations for data centers because of their power
capacity that can support data centers’ electricity
manufacturing’s revival requirements. Developers should be proactive in
The industrial sector is likely to benefit from the cornering the demand from data centers by
Marcos Administration’s push for highlighting features of industrial parks such as
industrialization. Prioritizing job-generating the potential for customization and subsidized
manufacturing activities was among then- utility costs. Upcoming data centers located
candidate Ferdinand Marcos Jr.’s priorities.7 inside industrial parks include YCO Cloud
Colliers believes that improving manufacturing Centers in Light Industry and Science Park 4 in
competitiveness should result in greater inflow Batangas and Dito Telecommunity in Clark Global
of investments and these should benefit City in Pampanga.
industrial parks, especially those located in Top industries that will drive demand for data
northern and central Luzon. centers
Cloud
In June 2022, the Department of Trade and computing
Telecom
Industry (DTI) highlighted that it is expecting
more than PHP500 billion (USD8.4 billion) worth
E-commerce Government
of investments in the Philippines in the next 18
months. According to DTI, the manufacturing
sector will likely be a major recipient of these Banking and
Hospitals
finance
pledges.8 Colliers believes that this will play a
vital role in industrial space absorption once Source: Colliers
these investments materialize.
Industrial parks in Central Luzon will likely
Select industries that will likely receive remain as popular alternative options to CALABA
investment pledges in 2023 (Cavite-Laguna-Batangas). From 2023 to 2024,
we see the delivery of 210 hectares (520 acres) of
Electronics Automotive parts
manufacturing manufacturing
new industrial space particularly in Tarlac and
Subic. DTI is currently pitching Central Luzon as a
Logistics manufacturing and logistics hub, highlighting
Data centers
growth opportunities in Pampanga’s New Clark
City, Bataan’s Freeport Area, and Tarlac’s Luisita
Marine shipbuilding
and repair
IT-BPM Industrial Park.11 Singaporean firms are also
keen on investing in the Filinvest Innovation Park
Battery technology Agribusiness projects in New Clark City.12

Source: Department of Trade and Industry New industrial supply from 2023 to 2024

We also see the cold chain sector sustaining

Tarlac
demand for industrial and warehouse assets,
Crescendo Industrial Park
especially with the growing preference for online Subic
Filinvest Innovation Park –
groceries and same-day deliveries. Recently, the Phase 2 Tipo Hightech Eco Park Subic –
German-Philippine Chamber of Commerce and Phase 2

Industry (GPCCI) disclosed that there are seven

German companies which are seeking local
partners in the cold chain industry.9 The Board of
Batangas
Investments (BOI) aims to increase cold storage
Lima Technology Park Expansion
capacity in the country to 650,000 pallets by Ninoy Aquino
International Airport Batangas Technopark
2023 from 500,000 pallets in 2020.10
Source: Colliers
7Marcos bats for industrialization to create more jobs; 8Over P500-B 11Central
Luzon pitched as manufacturing, logistics hub; 12FLI woos
investment pledges expected in next 18 months — DTI’s Lopez; Singaporean firms
9German firms seek partners in cold chain industry; 10BoI compiling
7
database on cold chain facilities
For further information, please contact:

Joey Bondoc Richard Raymundo

Associate Director | Research | Managing Director | Philippines
Philippines +63 2 8858 9028
+63 2 8858 9057 Richard.Raymundo@colliers.com
Joey.Bondoc@colliers.com

Martin Aguila Brent Respicio

Senior Analyst | Research | Research Analyst | Research
Philippines | Philippines
+63 2 8863 4116 +63 2 8863 4197
Martin.Aguila@colliers.com Brent.Respicio@colliers.com

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