Metro Manila developers stall expansion plans amid headwinds

METRO MANILA real estate developers are pushing back expansion plans as they prioritize liquidity and safeguard their balance sheets, property consultancy firm Cushman & Wakefield said, amid elevated inflation and higher policy rates.

In its Q1 Market Beat report for Metro Manila, Cushman & Wakefield said current economic headwinds have placed capital values under “significant downward pressure,” driving developers to delay new project launches and stall high-risk investments.

“Several have taken decisive steps that signal caution hardening into a structural shift: expansion timelines are being pushed back, portfolio decisions placed firmly on hold, and operational priorities redirected toward cost containment,” the report read.

“For investors, heightened risk perceptions reinforce the imperative of disciplined financial management, with adaptive planning replacing growth ambitions and positioning resilience as the defining strategy in real estate.”

The Philippine economy grew by 2.8% in the first quarter, the weakest pace since the pandemic, while April inflation accelerated to 7.2%, exceeding market expectations.

Inflation is also projected to breach the central bank’s 2%-4% target, driven by rising oil prices and a weak peso.

The Bangko Sentral ng Pilipinas (BSP) also increased its benchmark interest rate to 4.5%, signaling more hikes as inflation remains elevated.

Cushman & Wakefield also noted that rising energy costs, supply disruption and construction inflation have weighed occupier optimism.

“Occupiers, confronted with rising expenses and uncertain delivery timelines, are reassessing expansion strategies — delaying relocations, scaling back fit-outs, and renegotiating leases to maintain flexibility,” it said, adding other local challenges such as the corruption linked to flood control projects add up to the heightened risk perception.

“If the crisis extends over a prolonged period, expansion timelines may be re-evaluated, portfolio decisions deferred, and operational strategies adjusted toward cost containment and resilience.”

Average gross office yields decreased to 6.70% in the first quarter of the year, dropping by 110 basis points (bps) quarter on quarter and 112 bps year on year.

Prime assets in Makati, Bonifacio Global City, and Ortigas remained stable, while non-prime assets faced higher vacancy risks and weaker demand.

“With the BSP raising policy rates, borrowing costs are higher, but the resilience of prime offices underscores investor preference for quality, while non-prime assets remain more exposed to cyclical pressures,” the report read.

Warehousing and industrial spaces remained resilient, underpinned by steady logistics demand and domestic supply chain requirements, Cushman & Wakefield said, while essential retail properties hold firm, with stable occupancy and reliable rental income.

“Concentrating on these asset classes enables investors and landlords to safeguard cash flow and mitigate risk when broader market conditions weaken,” it said.

“This shift highlights how defensive property types are increasingly viewed as safe havens, offering stability amid prolonged economic uncertainty.” — Juliana Chloe A. Gonzales