The Philippine real estate market presents diverse opportunities for 2024, fueled by a strong economic performance and changing market trends. The notable catalyst in this trajectory has been increased public spending, prominently visible by the third quarter of 2023. Government initiatives aimed at infrastructure development and urban renewal create ripe opportunities for real estate development, particularly in the areas adjacent to these new projects. Developers stand to benefit from rising demand for real estate spaces, while landlords can benefit from higher rental yields as these areas become more desirable.
Moreover, these projects generate new employment opportunities, further boosting the demand for housing and driving business activities, resulting in higher occupancy levels in the commercial sector. The government’s efforts to alleviate traffic congestion and promote connectivity is expected to boost the tourism market’s recovery, especially as travel confidence rebounds.
The Bangko Sentral ng Pilipinas reported that residential property prices witnessed a notable 12.9% increase in the third quarter of 2023, primarily attributed to single detached and attached houses outside the National Capital Region. This growth signals shifting preferences and growth potential for market expansion beyond Metro Manila. Communities and townships offering a blend of residential living with educational, commercial and leisure facilities are poised to benefit from the growing demand for residential properties outside the capital.
The office sector in the key areas monitored in the last quarter of 2023 experienced vacancy levels averaging between 11% to 35%. With more companies implementing full return-to-office and partial office work, the gradual rise in demand for office spaces presents promising prospects for rents and vacancy levels to stabilize in 2024.
Meanwhile, there is an increasing interest and development in growth cities, driven by the continued expansion of the business process outsourcing (BPO) industry. Cities like Dumaguete, for instance, outperformed office take-up in traditional central business districts (CBDs) like Cebu and Metro Manila. The appeal of these emerging cities is attributed to low operational and investment costs, including affordable land, rent, talent, and living expenses. Coupled with investment incentives from PEZA and BOI, these factors present an appealing opportunity for developers and landlords looking to capitalize on real estate investments in these emerging business hubs.
Additionally, the concept of working in one’s hometown has likely appealed to some talent pool, seeking proximity to family and a more relaxed working environment, free from the challenges of urban commuting. A study done by Cisco showed that office development and transformation promoting a collaborative and social working environment is favored by employees returning to the office. It was further reported that more than half of the Philippine employers anticipate their workforce to adopt hybrid work arrangements within the next two years. Therefore, creating appealing office spaces stands to benefit landlords and developers in the years ahead.
Retail spaces across the markets monitored during the third quarter of 2023 maintained robust occupancy levels, typically maintaining an average of around 90%. However, it is worth noting that in the Paranaque – Pasay Bay area, only super-regional malls performed at levels closer to the industry average. This observation suggests opportunities for landlords and developers to expand their retail portfolios and indicates the market’s capacity to accommodate modest rent hikes.
The hospitality market holds promising prospects for real estate developers and landlords as occupancy near pre-pandemic levels. This trend is particularly evident in key areas such as Makati CBD and BGC, where average property occupancy rates stood at 74% and 89%, respectively. Moreover, ambitious infrastructure developments aimed at improving inter-island connectivity are poised to fuel growth in the hospitality sector. Foreign arrivals have been on the rise; the Philippine Travel Agencies Association reported that actual foreign arrivals outperformed initial targets for 2023 with an impressive 4.88 million visitors from January to November 2023 alone. As the Philippines opens its doors to more visitors, set to welcome an estimated 7.7 million tourists in 2024, underscores the positive outlook for real estate developers and landlords operating in the hospitality sector.
The Philippine real estate market is poised for a transformative year in 2024. Changing market dynamics stand to benefit landlords and developers to venture outside the typical CBDs with rising demand for housing and office spaces outside Metro Manila. The retail sector’s resilience, demand for collaborative and social office spaces, and the rebound of hospitality add to the optimistic outlook, the real estate sector remains at the forefront of these dynamic changes.