Riding the momentum: Sustained Philippine economic gains to trickle down on property sector

The Philippine economy grew 7.6% in 2022, its fastest pace of growth in more than 40 years, exceeding the government’s target of between 6.5% and 7.5%. According to Colliers Research, this is a positive signal for the property market, which, over the past decades, mirrored the boom–bust cycle of the country’s economic output.

This economic expansion should support positive net take-up of office space in 2023 and continued rebound in Metro Manila’s pre-selling and secondary residential markets. An aggressive stance taken by the national government in attracting manufacturing investments should result in greater absorption of industrial space across the country. The personal consumption-led economic growth should also spur retail and hotel demand. To cash in on the sustained growth, developers should line up more projects in key growth areas outside of Metro Manila. Developers of industrial parks and facilities should also prepare for greater take-up as manufacturing investments committed with investment promotions agencies (IPA) take up space.

Office sector

Office transactions[Office transactions](https://www.colliers.com/en-ph/research/colliers-quarterly-property-market-report-office-q4-2022-philippines) in Metro Manila in 2022 reached 603,800 square meters, up 43% from the 422,400 square meters recorded in 2021. Meanwhile, provincial transactions nearly doubled to 222,800 square meters from 113,100 square meters a year ago. Outsourcing firms accounted for nearly 70% of total provincial deals. Cebu, Davao, and Pampanga covered nearly 90% of total provincial transactions in 2022.

Net take-up in 2022 reached 110,500 square meters, lower than our initial forecast of 140,000 square meters, but still a reversal from the negative net absorption that we recorded from 2020 to 2021. In 2023, we project net take-up to more than double to 228,000 square meters.

Residential sector

Colliers recorded the completion of 9,000 condominium units in 2022[completion of 9,000 condominium units in 2022](https://www.colliers.com/en-ph/research/colliers-quarterly-property-market-report-residential-q4-2022-philippines), which is a mere 3% rise year-on-year. This brings Metro Manila’s condominium stock to 151,200 units as of end-2022. From 2023 to 2025, we project the annual average delivery of 6,700 units. Demand in the pre-selling market rebounded as we recorded about 20,000 units sold in 2022, from a take-up of 13,300 units in 2021. Meanwhile, full-year launches reached 24,200 units, down 19% year-on-year. In our view, the rising interest and mortgage rates, as well as the increasing prices of construction materials likely tempered condominium launches in 2022. New launches have yet to revert to pre-Covid-19 pandemic levels. 

Hotel sector

Data from the Department of Tourism (DOT) show that foreign arrivals reached 2.65 million in 2022, 1,519% higher than the 163,879 arrivals in 2021. This figure exceeded the DOT’s initial target of 1.7 million for the year. With renewed optimism, the DOT now expects foreign arrivals to reach 4.8 million in 2023, although it remains below the record-high 8.2 million international arrivals recorded in 2019.

Average occupancy in 2022[Average occupancy in 2022](https://www.colliers.com/en-ph/research/colliers-quarterly-property-market-report-hotel-q4-2022-philippines) reached 51%, up from 44% in 2021 and 20% in 2020. This is attributed to holiday-induced spending, return of more Filipinos working abroad, and the surge in Meetings, Incentives, Conferences and Exhibitions (MICE) activities. In 2023, we project average hotel occupancy in Metro Manila to breach 60% due to the influx of more foreign visitors and continued growth from the location staycation market. 

https://www.colliers.com/en-ph/research/flash-report-sustained-philippine-economic-gains-trickle-down-property-sector#:~:text=In%202023%2C%20we%20project%20average,from%20the%20location%20staycation%20market.