Improving GDP a boon for Philippine property | Inquirer Business
Colliers Review

Improving GDP a boon for Philippine property

The Philippine economy continues to benefit from postpandemic gains. Multilateral lending firms and equity analysts are projecting the country’s economy to post sustained growth over the next 12 months and this should bode well for the property segment.

While the Q1 2023 gross domestic product (GDP) of 6.4 percent was the slowest pace recorded since Q2 2021, it is slightly better than economic analysts’ median forecast of 6.1 percent. It is also one of the fastest in Asia.


The Philippine economy is undeniably on its way to recovery after a disruptive two-year period (2020 to 2021). The challenge for economic managers now is how to make growth more sustainable and inclusive. Ultimately, GDP expansion should be more diverse, with more economic sectors involved and a greater fraction of the population benefiting from the growth.

Supply-led office vacancy

Vacancy finally declined, halting 11 consecutive quarters of increase. As of end Q1 2023, it reached 18.7 percent, a marginal improvement from the 18.8 percent posted in Q4 2022.


However, we expect vacancy to reach 21 percent by yearend, higher than our previous forecast of 20.2 percent due to muted take-up as well as completion of new office spaces in Metro Manila.

Office deals in the capital region reached 117,500 sqm in Q1 2023, up by a mere 6 percent from the 111,200 sqm of deals recorded in Q4 2022. However, this figure is down 27 percent from the 160,700 sqm posted a year ago.

Colliers also recorded the completion of 48,000 sqm of new office space in Q1 2023. By the end of the year, we project the completion of 569,100 sqm of new supply, down from our previous forecast of 641,100 sqm. Ortigas central business district, Quezon City and Makati fringe are likely to account for close to 60 percent of the new supply.

Net absorption reached 20,400 sqm in Q1 2023, almost double the 10,300 sqm recorded in Q4 2022. It is also the fifth consecutive quarter of positive net take-up since Q1 2022. In 2023, we project net absorption to reach 116,400 sqm, a marginal increase from the 110,500 sqm in 2022.

Condominium rents, prices starting to recover

Colliers meanwhile sees slower condominium completion this year.

In Q1 2023, we recorded the completion of 1,200 units, down 70 percent quarter on quarter (QOQ). Colliers expects the delivery of only 2,300 units for the remainder of 2023. We see new supply picking up in 2024 with the delivery of 11,200 units, the highest annual completion since 2019.

In our view, the slower delivery of new units, coupled by recovery in residential leasing, will likely contribute to improvement in vacancy and eventually result in a faster rental and price acceleration in key business districts. In Q1 2023, vacancy in the secondary market dropped to 17.4 percent from 17.6 percent a quarter ago. We project rents and prices to increase further by 2 percent and 3.9 percent, respectively this year.


For the Metro Manila pre-selling market, Colliers recorded the take-up of 5,900 units in Q1 2023, up 70 percent year on year. Pre-selling launches meanwhile reached 4,700 units during the period.

Albeit an improvement year on year, we believe that the rising prices of construction materials as well as elevated interest and mortgage rates will continue to constrict residential condominium launches in the capital region.

The surging prices of construction materials, along with rising land values in Metro Manila, should also prompt developers to launch more upscale to luxury condominium units (P12 million and above). In Q1 2023, these projects accounted for nearly 40 percent of new launches.

Revenge shopping continues

In Q1 2023, vacancy across malls in the capital region dropped to 14 percent. Major developers have been reporting that consumer traffic has now reverted to 90 to 100 percent of pre-pandemic levels. Some mall operators noted that footfall especially in Q4 2022 was even greater than pre-pandemic levels. With rising purchasing power due to improving consumer confidence and personal income tax cuts implemented by the government, retailers have been active in taking up physical mall space.

From Q4 2022 to Q1 2023, Colliers recorded the delivery of only 15,000 sqm of new retail space with the completion of Mitsukoshi Mall in Fort Bonifacio. In 2023, we project the delivery of 439,000 sqm of new retail space, more than 10 times higher than the 31,000 sqm completed in 2022.

Colliers is optimistic that sound macroeconomic fundamentals are likely to support the retail sector’s growth over the next 12 months. The reactivation of high-density retail, staging of various events at malls’ activity centers, and renewed interest in experiential retail should entice more Filipinos to visit physical malls and further stoke spending.

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