Recovery takes shape as Philippine property markets adapt in Q1 2025

The Philippine residential market showed signs of a moderate recovery in the first quarter of 2025, with a 14% increase in condominium demand, according to Leechiu Property Consultants.

This growth was supported by favorable policy rate cuts and attractive developer promotions. Meanwhile, the retail and data center sectors also demonstrated resilience, with retail sales surpassing pre-pandemic levels and the data center market continuing to attract investment despite challenges.

“We’ve seen a good start for the year for the residential market. But we need to move with caution for now due to very recent developments in the world capital markets. For developers, they will need to be more aggressive with their marketing: their promos, payment terms. For buyers, this will be a good time to research and take a deeper dive and look at the developer offerings. There might be a short window of opportunity to acquire property at favorable terms while supply is not yet at comfortable levels,” said Roy Golez, director of research and consultancy at Leechiu.

Residential condominium demand in Metro Manila grew by 14% in Q1 2025, with a total of 6,508 units taken up. This uptick comes as key policy rate cuts over three consecutive quarters, and the anticipation of more, have helped ease buyer concerns and fuel property acquisitions.

New residential project launches saw a sharp drop of 77%, with only 1,347 units launched in Q1 2025 compared to 5,928 in the previous quarter. Developers are focusing on marketing existing inventory, particularly within the mid-range segment, before rolling out new projects.

Non-performing Residential Real Estate Loans (NPRREL) continued their decline, reaching 6.3% in 4Q2024, down from a peak of 9.6% in 3Q2021 during the pandemic. However, this ratio has yet to return to pre-pandemic levels.

While developer promotions and competitive payment terms have spurred buyer interest, the recent volatility in global capital markets may temper this enthusiasm. Buyers are advised to conduct thorough research to capitalize on favorable terms while supply remains tight.

The luxury residential segment experienced a 39% decline in sales this quarter. However, this sector remains attractive for long-term investors, as several developers plan to launch new luxury projects in the coming years, making the market increasingly competitive.

The retail sector showed a strong recovery, with revenues from the top three mall developers surging 19% above pre-pandemic levels. Between 2019 and 2024, 977K sqm of Gross Leasable Area (GLA) was added, increasing retail space portfolios by 9%.

The food and beverage (F&B) sector has exceeded its 2019 revenue levels by 11% as of the first nine months of 2024, reflecting strong consumer demand and recovery in the retail market.

The Philippines' data center market remains strong, with a current power capacity of 215MW and an additional 1,505MW under development. Despite local concerns, the government's renewable energy targets are driving long-term confidence in the sector, attracting continued foreign investment.

“The outlook for the Philippine property market in 2025 remains cautiously optimistic. The residential market is expected to continue its recovery, although global capital market volatility may introduce short-term uncertainties. Developers are likely to remain focused on selling existing inventory, particularly in the mid-range and luxury segments, where competition is expected to intensify,” Leechiu said.

It said the retail market is expected to sustain its recovery, with further growth in consumer spending, particularly in the F&B sector. As more malls are developed to meet evolving market demands, the sector is poised for continued growth.

The data center market will remain a key growth area, with investments being attracted by government support for renewable energy initiatives and the long-term potential of digital infrastructure in the region.

Meanwhile, the Philippine office market demonstrated a 7% increase in year-on-year demand of 355,000 square meters, despite the absence of Philippine Offshore Gaming Operators (POGOs) and demand from government-related deals.

This is largely driven by the IT-Business Process Management (IT-BPM) sector, predominantly from Global In-House Centers (GICs), which continue to view the Philippines as a strategic outsourcing destination. Notable sub-sectors include companies that are in the healthcare and financial industries.

The Ortigas/Mandaluyong/San Juan area recorded the highest number of lease transactions, totaling 59,000 sqm, reflecting growing interest in emerging submarkets offering competitive rental rates. Meanwhile, Bonifacio Global City has already absorbed 51k sqm—equivalent to 40% of its total demand from 2024 (126k sqm)—within the first quarter of 2025 alone.

The number of vacant spaces has declined from 312k sqm to 277k sqm, primarily driven by the continued exit of POGOs. With the pace of these exits tapering off, we expect contractions to ease further in the coming quarters.

The nationwide office vacancy rate held steady at 17% in Q1 2025, marking a slight improvement from the previous quarter’s 18%. While vacancy remains in double digits, the decline reflects a gradual recovery, driven by sustained demand and a slowdown in space contractions. Vacancy is expected to trend further downward in the coming quarters, particularly in core CBDs such as Makati and BGC, as active leasing requirements begin to convert into signed deals.

The Philippine office market is projected to achieve a net take-up of 490,000 sqm by end-2025, representing a 16% year-on-year increase. This growth will be fueled by strong leasing activity, particularly from the IT-BPM sector, and a continued slowdown in space contractions—largely due to the tapering of POGO exits that had previously dampened market performance.