APPD Market Report Article


September 4, 2023

Janlo Delosreyes, Head of Research, Philippines


PHP 828


Minimal uptick in net absorption as RTO rates remain unmoved

  • The leasing market recorded a net absorption of 64 units in 2Q23, sustaining its positive trajectory but relatively slower than previous levels. Stagnant return-to-office (RTO) rates, and elevated, albeit contracting, inflation rates have directly influenced leasing activities during the quarter. Meanwhile, activities from foreign expatriates continued to buoy the segment amid a cooler market. 
  • On the other hand, investment activities in the residential market continued to be challenged with interest rates remaining high, pushing some investors to delay purchases. 

No new supply; vacancy rate decreases slightly

  • No new units were turned over in 2Q23. Nonetheless, the remainder of the year is scheduled to introduce around 2,600 units by year-end, potentially weighing on the sustained recovery of vacancy levels.
  • The vacancy rate continued to fall and settled at 7.1%, a 9.2 bps decrease q-o-q. Lack of new supply and the positive trajectory of net absorption aided in the minimal decline of vacancy levels. 

Rents and prices gradually rising in line with slow uptick in demand

  • Rents continued to follow an upward trend and settled at PHP 828.4 per sqm per month, a 0.4% increase q-o-q. The slow but stable uptick of leasing activities has pushed some unit owners to bump up rents cautiously. 
  • Similarly, capital values expanded and settled at PHP 282,573 per sqm, a 0.9% increase q-o-q, despite a lean market. Developments which saw healthy take-up and limited available units have pushed up prices, but at a slower pace than previous levels as interest rates remain elevated.

Outlook: Rents and prices to sustain slow recovery until year-end

  • The volume of new supply slated to enter the market in the remaining quarters of the year, coupled with the expected sluggish uptick in RTO levels, are expected to push up vacancy levels in the near term. Similarly, the sales market is likely to remain cool until the year-end, with interest rates anticipated to sustain its peak.
  • Nonetheless, an uptick in rents and prices is still projected for the latter half of the year, driven by new, prime assets scheduled to enter the market, as well as better performing assets that have more room to bump up rates. However, growth is likely to remain slow and below previous levels due to a leaner market. 

Note: Manila Residential refers to the Makati City and Taguig City mid-high and luxury residential market.

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