A confluence of economic forces has bolstered real estate demand in recent years, with an influx of outsourcing firms, rising incomes, cash-laden investors and the liberalisation of key sectors all playing a part. As a result, the real estate sector has exhibited strong growth, with a variety of new residential and mixeduse projects spread across the National Capital Region (NCR), as well as other fast-growing secondary cities.

The property landscape of the NCR has significantly evolved over the last few decades, with new highrise developments altering the city’s skyline almost beyond recognition. While steady economic growth has played a pivotal role in the development of new projects, the liberalisation of key sectors such as telecommunications, banking and shipping has also had a positive effect on the absorption of office space. Likewise, higher incomes have led to an increase in demand for housing, with remittances from overseas workers also helping to drive home purchases.

More recently, modern developments and an expansion of infrastructure projects have transformed the NCR and given rise to new urban centres. Previously underutilised land has been rejuvenated and turned into upscale residential areas, such as the self-contained community known as Rockwell Centre, a former power-generation facility, which now covers around 15 ha of prime land in Makati, and hosts an array of commercial and residential facilities. Another example of the region’s evolution is found in Bonifacio Global City, a former military base, that has become a bustling commercial district in Metro Manila, with modern office blocks and upmarket retail.

Sector Value 

As far as investment is concerned, the Philippines offers one of the most attractive urban hubs for developers and real estate investors in Asia, with Manila ranking third in terms of city investment potential in the report “Emerging Trends in Real Estate Asia Pacific 2017”. According to Colliers International, a global real estate consultancy, rental yields in Manila stood at 7% as of the first quarter of 2017, higher than any generic bank time deposits on offer during that period. The Global Property Guide, an international property consultancy, indicated in 2016 that the Philippines offered higher gross residential rental yields than other Asian markets, with residential prices below those of Hong Kong, Japan, Singapore, India, Taiwan and Thailand. Likewise, 2016 was a very active year in terms of property transactions; the Philippines had the 10th-highest value in the Asia-Pacific region with a total of P47bn ($928.5m) excluding undeveloped land, a 144% increase over 2015.

With a variety of upmarket facilities, Makati is a leading choice among premium investors, and its land value grew by 13.85% year-on-year (y-o-y) in the third quarter of 2017. Within Makati, the highest average capital value belongs to Rockwell Centre, with an escalation rate of 123% based on pre-sale prices. West Block, Manansala Tower, Joya Lofts and Towers, One Rockwell, and Edades Tower and Garden Villas are some of the other sought-after locations in the city.

Real Demand

Demand for office space has risen in recent years on the back of significant growth within the business process outsourcing (BPO) and online gaming industries, which in turn have boosted construction projects, with a focus on integrated mixed-use developments. According to Pinnacle Real Estate Consulting Services, the real estate market experienced margins above 30% between 2012 and 2017, with urban migration, the growing presence of BPO firms and increased spending power from overseas workers identified as key growth factors.

Indeed, record remittances have bolstered consumer spending and real estate demand, with a total of $29bn coming in from overseas in 2016 – $1.7bn from Singapore alone. In addition to increased spending power, the Philippines is now rated as investment grade by a number of international credit rating agencies, leading to increased investor appetite.

With a relatively young population there is a significant need to keep building more homes and office space. However, the growth drivers of the industry have also led to a demand-supply mismatch. While the nation’s real estate sector as a whole has performed well, the lack of affordable housing remains a major challenge, complicated by the high levels of poverty and rapid population growth, measured at 1.9% annually. Given these dynamics, previous administrations have not been able to solve the housing conundrum. To date, there is a backlog of 5m residential housing units, with forecasts estimating that the gap will remain at a similar number until 2030.

Supply shortages aside, strong economic growth, poverty-reduction efforts and conducive fiscal policies are expected to facilitate home ownership. Annual GDP growth is forecast at between 6.5% and 7.5% until 2022, while the state is working to bring poverty levels down from 24% to 16% by that date. The BSP is also pressing for reforms that will empower more people to buy homes, such as a low interest rate regime. In addition, Metro Manila’s fringe areas are being developed for affordable housing. However, while the BSP’s efforts are welcome, they are unlikely to be sufficient on their own (see analysis).

Office Space

While there has been a slight decline in demand from the BPO segment, office occupancy is still strong. Yet concerns remain that protectionist policies touted by US President Donald Trump’s administration may restrict future BPO demand from US firms, as the US seeks to bring jobs back onshore.

With a total grade-A office supply of 4.5m sq metres and vacancy at 5%, Manila’s office rental growth reached 4.3% y-o-y in the third quarter of 2017. Some 220,000 sq metres of gross leasable area (GLA) was added to the total office stock that quarter, the majority of which was pre-committed or taken up immediately. According to market data from global real estate consultancy Santos Knight Frank, office take-up or net absorption for 2017 was around 600,000 sq metres, with 3.7m sq metres of GLA projected to come on-line between 2017 and 2022, and 946,782 sq metres of leasable office space expected to be added to the current supply in 2018.

When broken down by segment, owner-occupied leasing transactions slowed in 2017, as the online gaming, e-commerce and logistics industries drove office space demand in the second quarter. Likewise, banking, services and manufacturing increased their share of office space demand over the period, with average vacancy rates in Metro Manila increasing to 5% in the second quarter of 2017, slightly higher than the 4% recorded in the previous quarter, mainly due to the high volume of new office buildings coming on-line. In terms of vacancy rates, Bay City’s were the highest during 2017, at 13%, followed by Quezon City (11%) and Alabang (8%). Average vacancy in McKinley Hill inched up from 5% in the first quarter to 6%, while available space in Bonifacio Global City increased from 3% to 5%. Vacancy in the Makati Central Business District (CBD) and Ortigas CBD remained constant at 2%.

Home Market

Prices continue to rise on the residential front; the cost of luxury residential units increased by 28% in 2017, with a price range of P182,000 ($3600) to P350,000 ($6910) per sq metre. According to Santos Knight Frank, the percentage of properties sold in Metro Manila rose to 85% in 2017, compared to 79% in 2016. The price of properties in the affordable segment was up 7% y-o-y to between P57,000 ($1130) and P89,000 ($1760) per sq metre, with mid-range units simultaneously witnessing a 6% increase to prices of between P78,000 ($1540) and P176,000 ($3500) per sq metre. High-end properties, meanwhile, rose by 4% to a range of P108,000 ($2130) to P187,000 ($3700) per sq metre. “Prices are increasing and this is being pushed by real demand. People tend to point to the risk of speculation, but the demand backs up new projects coming on-line,” Monique Cornelio Pronove, CEO of Philippines-based international real estate firm Pronove Tai, told OBG.

Approximately 52,000 residential units are expected to be turned over to the public in 2018, of which 409,377 sq metres – or 76% of the total space – will be located in Bonifacio Global City. Sales of condominiums in Metro Manila, meanwhile, have been dominated by mid-range units, which accounted for 64% of the total stock, according to estimates from Santos Knight Frank, followed by high-end (24%), affordable (10%) and luxury projects (2%).

Band of Builders

With a growing number of real estate developers present in the market, particularly in the mid-market condominium segment of Metro Manila, margins have narrowed. Nevertheless, a number of key players continue to outperform the market as a whole, including local property developer Ayala Land, a subsidiary of Ayala Corporation. In addition to launching P100bn ($2bn) worth of developments in 2017, the group has committed P3bn ($59.3m) to building five workers facilities of 1500 units that will house 6000 people across four sites in Makati and Taguig. SM Development (SMD), which constructs stores, malls, banks, hotels and leisure facilities, is also ramping up construction plans, after launching its first high-rise condominium in Dasmariñas in September 2017 worth a reported P3bn ($59.3m). According to Pinnacle Real Estate Consulting Services, SMD plans to sell 1057 units with a price tag of between P2.6m ($51,365) and P4.5m ($88,902).

Megaworld – another major player in the local real estate development arena – has also been hard at work, officially opening the Southwoods Mall in 2017 at an estimated total cost of P2bn ($39.5m). Southwoods is the company’s 14th mall to date, and the construction firm plans to build and operate another 14 by 2020. Robinsons Land Corporation, the real estate arm of JG Summit, is also expanding its property portfolio; its 271-room Dusit Thani Mactan Cebu resort is expected to be completed by 2019. DMCI Holdings, meanwhile, published sales revenues of P26.2bn ($517.6m) in the second quarter of 2017, selling a total of 6206 units and 3473 parking slots.

Hard Numbers

According to preliminary figures from the Philippine Statistics Authority (PSA) for the final quarter of 2017, there were 33,445 construction projects under way nationwide, representing a total floor area of 7.7m sq metres. Overall construction activity was up 3.6% over the same period of 2016; however, residential building construction activity declined by 4.3% from 24,752 projects to 23,693. With the exception of the “other residential” category, all types of residential construction declined over the period: condominium buildings fell by 46.6%; apartments by 10.2%; duplexes and quadruplexes by 4%; and single-type houses by 3.5%. Conversely, non-residential construction activity posted 23.2% growth in the final quarter of 2017, with a total floor area of 3.7m sq metres from 4903 projects. In terms of the average cost per sq metre, residential-type construction costs decreased by 11.2% to P10,777 ($213), with residential condominium costs falling by 26.4%; inputs for single houses down 3.4%; and building costs for duplexes and quadruplexes lower by 3.3%.

Among non-residential construction, commercial buildings accounted for 3129 projects and 54% of total floor area in the fourth quarter of 2017; industrial buildings numbered 554 with 21% of floor space; institutional building saw 830 projects for 17% of floor area; and agricultural buildings totalled 281 and 7% of space. Meanwhile, the number of projects undergoing additions to the existing structure increased by 30.1% compared to the same quarter of 2016 to tally 1149 projects. Similarly, the number of units under alteration and repair was up 38.8% to 3700, versus 2666 in the fourth quarter of 2016.

Regarding geographical spread, the top-five regions accounted for 56.5% of all construction projects around the country in the final quarter of 2017. Calabrazon led with 7292 projects, or 21.8%, followed by Central Luzon with 3611 projects representing 10.8% of the total. Central Visayas saw 2804 building projects (8.4%), the NCR was working on 2625 projects (7.8%) and the Davao Region had 2575 (7.7%).


A construction boom in Cebu, an island province in the Central Visayas Region, continued throughout 2017 and into the first quarter of 2018. Based on second quarter 2017 data from the PSA, Cebu province had a total of 1518 construction projects with approved building permits, representing 4.2% of all building works nationwide.

A defining feature of the real estate market in Cebu is partnerships between national and local developers in the building of mixed-use complexes. Highlighted in the report “When Giants Invade: National Property Developers Redefining Cebu”, released by Colliers International Philippines in November 2017, partnerships between such firms were identified as an effective measure to allow developers to expand their land bank. According to the report, national developers are able to leverage local developers to customise their real estate portfolio to regional preferences.

As of the first quarter of 2018, a number of national and local tie-ups had gained significant traction, such as Ayala Lands’ partnership with AboitizLand for Gatewalk Central, an integrated mixed-use development in Mandaue City, which is envisioned to be the dynamic centre of the city. While under construction, the development is estimated to create 1300 jobs, with 9000 jobs to be generated once a retail mall and office suites are completed in 2019.

Local and international developers are also collaborating, with one example being the Philippines’ Taft Properties and Hongkong Land’s joint development of a 20-ha, mixed-use site along Mactan Channel, also in Mandaue City. Building commenced in 2015 and the space occupies a waterfront site at a prominent location between Mactan Island – the home of Mactan-Cebu International Airport (MCIA) – and Cebu Business Park. The project will be developed in phases over a period of more than 10 years, with phase one including two blocks of 1200 condominium units. The towers are scheduled for completion by 2020.

The opening of a new terminal building at MCIA in 2018 is expected to be a significant growth driver for real estate development in the surrounding area. “Mactan aims to position itself as a destination in the Cebu region, and the private sector has taken note. Real estate companies and entertainment developers are entering the market to invest in the island,” Ray Manigsaca, president of Cebu-based real estate developer AppleOne Properties, told OBG.

Land reclamation has provided another opportunity for national players with limited land banks to access more affordable development ground, in comparison to mature centres around the country. Broadly speaking, the availability of reclaimed land has enabled developers to establish a diversified portfolio of real estate offerings at a discounted rate. Some of the prominent examples of these projects include the 100-ha light industrial park in the town of Minglanilla and the 1500-ha reclamation project in Cordova, both of which have been proposed by SM Prime.

Growth Pockets

With space being limited in premier districts, the administration of President Rodrigo Duterte has been drafting plans to open up access to new areas. In an effort to alleviate Metro Manila’s urban pressures, a key part of the government’s strategy has been to push structural development outwards. As a result, new communities have sprung up in other parts of the capital region, such as Quezon City, Bay City and North Epifanio de los Santos Avenue, as well as in the Bulacan province that sits to the north of Manila. On the back of the massive Build, Build, Build programme, these up-and-coming areas are set to benefit further from their proximity to new transport infrastructure, including recently constructed bridges, skyways and rail systems.

Located around 100 km north of Manila in Pampanga City near Clark International Airport, the construction of the Philippines’ first green, disaster-resilient, high-tech metropolis, known as New Clark City, is testament to the government’s efforts to spread economic opportunities around the country and alleviate congestion in the capital. The creation of New Clark City was agreed in February 2018 when the Bases Conversion and Development Authority and Japan Overseas Infrastructure Investment Corporation for Transport and Urban Development signed a memorandum of cooperation with Surbana Jurong of Singapore, which will be responsible for designing the smart city concept that will have fully integrated infrastructure and utilities for power, water, sewerage, ICT, security and traffic management.

Stretched over 9450 ha of land, New Clark City is envisaged to be larger than Manhattan and home to approximately 1.2m people, with current estimates suggesting the project will be completed between 2043 and 2048. According to local reports, the city will feature an agro-industrial park and a large sports complex, as well as house several government departments. At a total design cost of P728.14bn ($14.4bn), the smart city will have an eco-friendly design with wide open spaces – one feature of which will be to protect the city against floods.


Upbeat macroeconomic indicators bode well for the local real estate market, though the housing backlog will persist as demand continues to outstrip supply, at least for the foreseeable future.

Unlike previous real estate booms, which were driven by speculative investors, the current market is led by the government’s infrastructure policy and real demand for housing, which has been bolstered by low inflation and interest rates, and strong remittances from overseas workers.

In all likelihood, more foreign companies will set up shop in the Philippines, particularly those looking for tech support, while the online gaming industry will become an even larger driver of office space demand. The profession is being backed by the government through the Philippine Amusement and Gaming Corporation, which is expected to grant more operating licences once the current regulations limiting the number of offshore gaming operators are eased.