Developers urged to innovate as rental demand evolves in the capital

Residential rental yields in Metro Manila are expected to remain modest in the near term, but property analysts say this environment offers opportunities for both tenants and landlords as market dynamics continue to shift.

“The current oversupply of condominiums in Metro Manila has placed downward pressure on rental yields,” said Jamie S. Dela Cruz, research manager at KMC Savills. “For tenants, this means more choices at competitive rates, while for landlords, it’s a chance to differentiate offerings and attract stable, long-term clients.”

Data from Colliers Philippines showed average rental yields for condominiums in Metro Manila improved slightly to 4.2 percent in the second quarter from 4 percent in 2019. However, overall vacancy rates remain elevated at about 25 to 26 percent, keeping yields in check.

Despite this, Colliers research head Joey Roi H. Bondoc said the leasing market is gradually finding new demand sources. “As more companies enforce return-to-office policies, occupancy may improve and provide support to the rental market. Expats and professionals who prefer to rent rather than buy are also expected to sustain demand,” Bondoc said.

Colliers data showed around 30,500 ready-for-occupancy units remained unsold in the second quarter, with the Bay Area, Makati fringe, Pasig, and Manila accounting for more than a third. Still, the large stock means tenants now enjoy competitive rates, particularly in submarkets that once relied heavily on Philippine offshore gaming operators.

In the Bay Area, for instance, studio rents now average around %u20B1700 per square meter, well below pre-pandemic highs of %u20B11,200. Analysts said this could attract new renters, including corporate accounts and professionals who commute from nearby provinces.

Dela Cruz noted that landlords who adapt to shifting tenant preferences can still achieve healthy occupancy. “Unit owners can differentiate their properties by offering upgrades such as parking slots, improved interiors, or enhanced amenities like reliable internet and security features,” she said.

She added that targeting specific tenant groups — including corporate employees under mandatory office return policies, expatriates, and professionals seeking convenience — could stabilize rental demand in the coming quarters.

Bondoc said the key for yields to improve is for vacancies to gradually decline, supported by evolving work arrangements and selective demand from both local and foreign tenants. “Once occupancy rates improve, we should see corresponding growth in rents and eventual recovery in yields,” he said.

For now, analysts view Metro Manila’s rental market as offering “tenant-friendly” conditions, while presenting investors with opportunities to capture value at more accessible entry points before the next growth cycle begins.