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Investment MarketBeat Report

Claro Cordero Jr. • 06/02/2024


  • Estimated average office (gross) rental yields in Q4 2023 inched downwards to 6.80% from its Q3 2023 level at 6.90%. Year-on-year (YoY), however, the rental yields increased by about 55 bps from its level in Q4 2022. Despite a respite from the hike in key global interest rates, C&W Research, however, estimates gross rental yields for the Manila market will slightly increase in 2024 in view of the anticipated second round effects of the consecutive policy rate adjustments made by the Bangko Sentral ng Pilipinas.
  • The overall residential prices posted a slower growth in Q3 2023 at only 12.9% YoY from 14.1% YoY in Q2 2023, whilst it remained almost double as compared a year ago when the Residential Real Estate Price Index (RREPI) only grew by 6.5% YoY. On a quarter-on-quarter (QoQ) basis, growth of prices in residential properties in Q3 2023 is at 3.4% QoQ, below the recorder growth of 5.3% QoQ last quarter and 4.6% QoQ in the same period last year. In terms of price growth by property type, faster growth were noted for duplex properties at 57.7% YoY from 24.6% YoY last quarter and condominium units at 8.3% YoY from 5.0% YoY. Meanwhile, the other property types grew slower with single detached/attached houses posting a growth of 16.8% YoY from 18.3% YoY and townhouses at 9.3% YoY from 5.0% YoY. Residential prices for properties located outside the capital region also accelerated at 14.3% YoY in Q3 2024 from 13.8% YoY last quarter, while prices of properties in Metro Manila decelerated to a growth of 12.3% YoY from 15.4% YoY.

  • The country posted the lowest average inflation rate for 2023 at 3.9% in December, bringing the full year average to 6.0%, which is well-above the BSP’s 2.0%-4.0% target range. The central bank forecast inflation to remain well within the target range in the first quarter of 2024, whilst it is projected to settle at 3.7% in 2024 and 3.2% in 2025. Upside risks to inflation are the increased transport fare, the impact of moderate El Niño weather conditions, rise in global oil market prices, and supply constraints on key food items. Meanwhile, the labor market continues to improve with the unemployment rate sliding to its lowest level at 3.6% in November 2023 amidst the country’s normalizing economic and business operations.


  • Amidst volatile global economic conditions and the continuing impacts of the high interest rate environment, GDP missed the growth target set by the government at 6-7% after posting a growth of 5.6% in 2023, down from 7.6% last year. Whilst the impact of the central policy rate hikes is seen to peak in 2024, the improving economic sentiment and investment appetite are seen to support growth in the medium term. Moreover, the central bank pegged the benchmark interest rate at 6.5% as of the end of 2023 while risks to the inflation outlook remain tilted to the upside.
  • The Philippines' net cumulative net foreign direct investment (FDI) inflows for January to October amounted to USD 6.53 billion, a 25% decline from the USD 8.74 billion net inflows recorded in the same period last year, attributable to the tamed investment undertakings amidst a bleak outlook for the global economy. Year-to-date (TYD), the sectors that attracted most investments are the manufacturing, wholesale and retail trade, real estate, and financial and information and communication, while net outflows were recorded in the utilities and insurance industries.
  • In the final quarter of 2023, consumers were more pessimistic as the overall confidence index (CI) dipped further to -19%, from -9.6% last quarter, influenced by the elevated inflation and lower income, as well as concerns on job availabilities and government policies.


  • Despite the declining trend in inflation and the anticipated pause to the sharp interest rate hike, economic recovery is still seen to be uneven across different markets. Thus, while over-all investment market sentiment is expected to improve, the geopolitical conflicts and geographic diversification strategy may further widen the recovery gap among key markets.
  • APAC investment volume in 2023 hit multi-year lows, as the performance of the office sub-sector remain lackluster. In the Philippines, large-scale investment transactions may still take time to fully-recover, as price expectations remain elevated as the effects of high interest rates remain sticky in the system. Office vacancy in the Manila market will continue to breach historical high levels due to balance of new completions in the short- to medium-term, as well as the continuous right-sizing initiatives of most global occupiers.
  • Driven by the ever-increasing demand for industrial space in most APAC markets, upward pressure on rents in high-quality logistics & industrial spaces in the Manila market is similarly expected. Due to the continued increase in e-commerce growth and optimisation of supply chains in APAC, the longer-term growth outlook for industrial space demand is seen to persist.
  • The strong presence of established Tier 1 developers (with massive exposure to other key sub-sectors such as office, retail and hospitality) in the logistics & industrial space market should aid in capturing new opportunities that are expected to flow from leveraging existing relationships with tenants to aid their expansion by providing bespoke solutions which will assist in prudent capital deployment, rather than flooding the market with excessive speculative build.


OFFICE Overall vacancy rates in office remains high despite the recorded positive absorption as it continues to be outpaced by the new supply of office space. As high vacancies persist, several landlords kept headline asking rent competitive by opting to reduce rates and holding off rental rate increases.

RETAIL Retail space demand is likely to show modest improvements amidst rising activity levels and international retailers kickstarting investment decisions, whilst downside risks persist as the high levels of prices and interest rates are seen to continuously weigh on consumer spending in the medium term.

INDUSTRIAL The near-term outlook of the other key drivers of industrial segment, particularly the manufacturing and trade industries, remain challenged amidst unfavorable global business climate whilst overall prospect for growth remains solid to cater to e-commerce supply chain requirements. Demand is particularly buoyant in industrial hot spots in CALABA area whilst capital values of industrial properties remain flat as new supply continues to keep up with growing demand for warehouses and industrial land.

RESIDENTIAL The residential market performance has remained soft as the slowing economy and affordability challenges hammered demand in the past quarters. Significant improvement in demand and capital values is seen in the near-term amidst resilient job market, bright outlook for OF remittances, and the anticipated benchmark rate cuts by the central bank.

HOTEL Following the sustained growth in visitor arrivals, travel and hospitality has shown steady improvements with occupancies in key markets closing to pre-pandemic levels. Nonetheless, the challenges such as the rising cost of hotel operations and the shortage in staffing are seen to persist in the medium term.


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