Phl real estate showed resilience the first half of 2025

The Philippine real estate market has shown resilience in the first half of the year.

In a report by full-service commercial real estate consultancy Prime Philippines, the country adapted to multiple challenges, including volatile US trade policies, ongoing geopolitical conflicts, tighter migration channels, and tempered investor sentiment.

While the economic growth has slowed, the inflation relief and growing consumer expenditure gave the market breathing room.

GDP growth slowed to 5.4 percent in the first quarter, weighed down by a 19.9 percent contraction in net exports, moderated private construction activity and high base effects. Furthermore, growth forecasts from the Department of Budget and Management (DBM), International Monetary Fund (IMF) and Asian Development Bank (ADB) were trimmed considering persistent global uncertainty.

Even with this slowdown, the Philippines ranked second among ASEAN economies, tied with China, behind Vietnam’s 6.9 percent expansion.

Despite global uncertainty, growth was sustained by domestic drivers. Household consumption rose 5.3 percent, supported by higher employment, easing inflation, and wage gains. The services sector, which accounts for over 60 percent of GDP, also expanded by 6.3 percent, Prime Philippines added.

Beyond sustaining growth, the Philippines recorded an average inflation rate of just 1.8 percent in the first half, positively well below the BSP’s two to four percent target, driven by lower food and transport costs, rice tariff cuts and favorable base effects. This gave BSP the opportunity to reduce its policy rate twice this year to 5.25 percent, with further cuts in the pipeline if inflation stays low.

Uneven office occupancy

Metro Manila’s office market posted a mixed performance in the first half of the year.

While NCR remains firmly in a tenant-driven market, Bonifacio Global City, Makati and Ortigas registered year-on-year occupancy gains of zero to three percent, driven by expansions from Business Process Outsourcing firms, professional services companies and government relocations.

By contrast, Bay Area and Alabang recorded slight drops of 3.2 percent and 3.7 percent, respectively, as vacancies from the leftovers of the Philippine Offshore Gaming Operations and right-sizing of BPO and IT companies persisted. The lingering oversupply in these areas extends the time of the landlords to backfill the vacated spaces.

Rental performance reflected these trends. Metro Manila’s average lease rate fell six percent year-on- year, with Pasay posting the steepest drop at 10.6 percent. Outside NCR, however, Davao’s rates rose 12.7 percent due to a shortage of Grade A PEZA-accredited spaces, while Metro Cebu saw a more modest 3.9 percent increase, in line with its recovery trajectory.

Office market support

Despite strong interest from government agencies and professional service firms, Quezon City’s occupancy declined by 3.5 percent, as much of the government’s requirements remain in the procurement stage and have yet to convert into actual take-up. Nonetheless, government agencies accounted for the majority, or 18.5 percent, of national office requirements in the first half, with interest concentrated in Quezon City, Pasay and Pasig.

Many of these agencies, headquartered in the Manila and Quezon City, are seeking to relocate due to aging facilities or are expanding their footprints.

Demand for BPO expansions

Following government interest, the BPO sector remained a key driver of office demand, accounting for 13.3 percent of the national total in the first half of 2025.

Prime Philippines adds that in Metro Manila, most activity came from the expansion of existing operations in Central Business Districts (CBDs) such as BGC, Makati, and Ortigas, reflecting sustained demand from outsourcing firms serving global markets — particularly in finance, IT and healthcare-related services.