Covering office, residential, hotel, and industrial, Colliers experts share insights on the performance of the real estate industry for the fourth quarter of 2023
PFA | Colliers holds briefing on property sector | Leading diversified professional services and investment management company Colliers (NASDAQ, TSX: CIGI) held its Q4 2023 Philippine property market briefing covering the office, residential, hotel, and industrial sectors.
Colliers experts from Research, Office Services, Capital Markets, and Valuation and Consultancy Services provided data-supported insights on how the industry performed in the last quarter of 2023 and how stakeholders can navigate the months ahead.
Office
Data compiled by Colliers’ Office Services show that Metro Manila’s office market performed better than expected compared to initial projections. Net take-up in 2023 reached 279,800 square meters, more than double compared to 2022. Colliers also noted that transactions continue to outpace lease surrenders.
A total of 611,700 square meters of office space was completed in 2023, lower than the 736,100 square meters completed in 2022. But despite new office supply, the vacancy rate stood at 19.3% as of end of 2023, averting the forecasted rate of 21.2%. Colliers data also show that the Bay Area and Quezon City cornered more than a third of new office supply.
Colliers continues to note deals from traditional and outsourcing firms implementing a mix of flight-to-quality and flight-to-cost measures. The office market has also seen more expansions (50%) and new entrants (10%).
According to Kevin Jara, Colliers Director of Office Services – Tenant Representation, occupiers should continue to take advantage of the current market conditions and invest in modern workspaces for the benefit of their employees.
“With sustainability now becoming a minimum requirement, landlords are encouraged to incorporate green features and secure certifications in both existing and future developments. Some landlords with presence in better performing submarkets may consider building more quality and green spaces to capture future demand.”
Residential
We are seeing tempered launches and take-up of pre-selling condominium units in Metro Manila, said Joey Roi Bondoc, Colliers Director of Research. “This can partly be attributed to still elevated interest and mortgage rates as well as large stock of vacant ready for occupancy (RFO) units in the capital region.”
Colliers data show that about 23,400 pre-selling condominium units were sold in 2023, while approximately 3,540 units were delivered in the same period, lower than our initial estimate of 4,920 units due to construction delays. According to Bondoc, the Bay Area will dominate new supply in 2024.
Colliers also sees prices increasing by 2.1% in 2024. “In our view, growth in prices should be supported by stable take-up of mid-income units in major business hubs,” said Bondoc.
According to Bondoc, developers are pivoting to growth areas outside Metro Manila and are launching massive master-planned projects in central and southern Luzon, and in major property investment destinations in Visayas and Mindanao. “Property firms should thoroughly assess the most attractive price segment for every residential submarket in Metro Manila. This should guide developers especially once they finally decide to launch new projects.”
Hotel
The Philippine hospitality sector continues to recover due to holiday-induced spending in the last quarter of 2023 and the revival of in-person events. Foreign tourist arrivals – at 5.45 million – also breached the Philippine government’s target of 4.8 million and is way above the 2.65 million arrivals recorded in 2022.
Hotel average daily rates (ADR) also grew by 10.4% in 2023, which is expected to sustain growth in 2024 as foreign arrivals are nearing pre-Covid-19 pandemic levels. Accoridng to Bondoc, growth in ADRs and occupancies are likely to be fueled by business and leisure demand.
“2024 will be a banner year for new hotel completion in Metro Manila. The tourism sector’s share to national economic output has also been improving with the segment establishing itself as a major job-generating sector of the Philippine economy.”
Bondoc added that to reap the sector’s gains, Colliers recommends that developers and operators maximize the return of in-person events and business travelers, attract more tourists from the Philippines’ non-traditional source markets, and align development pipeline with the government’s “Build, Better, More” initiative.
Industrial
The Philippine government intends to diversify its sources of foreign pledges and in the process secure more manufacturing investments. The country’s investment promotion agencies (IPAs) have been promoting the Philippines’ competitiveness as an investment hub and this should help the country attract more foreign investments which should boost industrial take-up.
In the first half of 2023, e-commerce firms, third-party logistics, food & beverage, and networking equipment manufacturers took up industrial space. Semiconductor and EV firms will likely drive demand in 2024.
Colliers sees the delivery of 100 hectares of new industrial space in the Cavite–Laguna–Batangas (CALABA) corridor in 2024, with Batangas likely accounting for half of the new supply.
Colliers also expects a marginal increase in land leasehold rates in 2024 as more e-commerce and FMCG firms take up space. Moving forward, we see a sustained demand for modern warehouses, and this should partly buoy industrial rents.
