Industrial sector poised for growth as PH attracts high-value manufacturers

The Philippine industrial real estate sector is poised for significant growth with the entry of high-value global manufacturers, but industry leaders warn that surging electricity costs could put a brake on the momentum.

Despite the country’s strategic location and skilled labor force, property consultancy firm PRIME Philippines revealed that many foreign manufacturers—particularly from China—have chosen neighboring countries like Vietnam over the Philippines due to prohibitive power rates.

“Out of more than 20 Chinese firms we engaged with between 2020 and 2023, only one went forward with expansion here. The rest bypassed the Philippines, primarily because of electricity costs,” said Jettson P. Yu, PRIME Philippines founder and CEO.

Yu pointed to the country’s current energy pricing structure, shaped by the Electric Power Industry Reform Act (EPIRA) of 2001, as a key constraint. While EPIRA was intended to foster competition and reduce costs through privatization, it has led to a pricing environment that, according to Yu, fails to support industrial competitiveness.

He urged the government to consider targeted power subsidies for manufacturers, calling the industrial sector “a sleeping giant” with untapped potential.

PRIME Philippines projects that demand for industrial space could reach at least 50 million square meters by 2035, driven by the expansion of logistics, data centers, and manufacturing facilities. But unlocking that potential, Yu emphasized, depends heavily on creating a cost-efficient environment.

Colliers Philippines echoed similar optimism tempered by caution. Joey Roi Bondoc, the firm’s head of research, noted that electric vehicle (EV) battery makers, tire manufacturers, and steel producers are increasingly eyeing industrial zones in North, Central, and South Luzon.

“These are big-ticket players bringing in capital and jobs,” Bondoc said. “But to keep them here—and attract more—we need to up our game.”

He identified Clark and Bulacan as emerging pharmaceutical and EV industry hubs, and stressed that the Philippines is currently well-positioned due to relatively low U.S. tariffs on its exports compared to some ASEAN neighbors.

Still, Bondoc warned that favorable tariff rates alone are not enough. “We’re hearing from officials that we could be the next destination for relocating manufacturers. But timing is critical. How quickly can we make ourselves genuinely competitive?” he said.

Key areas for reform, according to Bondoc, include streamlining business processes, improving infrastructure, expanding skilled labor training, and boosting compensation competitiveness.

A proposed Foreign Lease Investors Act, which would extend land lease terms for foreigners from 75 to 99 years, is also seen as a game-changer for industrial property demand. The bill, already approved by Congress, is awaiting President Marcos' signature.

Meanwhile, Colliers projects that around 400 hectares of industrial land will come online in the Calabarzon corridor—particularly in Calamba, Laguna, and Batangas—between 2025 and 2027, offering space but not yet solving the fundamental cost barriers for investors.

As the Philippines pushes to position itself as a hub for advanced manufacturing, developers and consultants alike agree: policy support, especially in the energy sector, will be the deciding factor between missed opportunity and sustained industrial growth.