UMVA has learned that Metro Manila real estate developers are significantly scaling back their expansion plans as they prioritize liquidity and safeguard their balance sheets amidst a challenging economic landscape.
The move comes as the industry faces elevated inflation and higher policy rates, which have placed capital values under substantial downward pressure. As a result, developers are delaying new project launches and stalling high-risk investments to maintain financial stability.
According to information obtained by UMVA, several developers have taken decisive steps to signal caution, pushing back expansion timelines, putting portfolio decisions on hold, and redirecting operational priorities toward cost containment. This shift in strategy reflects a growing emphasis on resilience over growth.
The Philippine economy grew at a sluggish 2.8% in the first quarter, marking the weakest pace since the pandemic. Meanwhile, April inflation accelerated to 7.2%, exceeding market expectations and adding to concerns about the economic outlook.
Inflation is expected to remain above the central bank's 2%-4% target, driven by rising oil prices and a weak peso. The Bangko Sentral ng Pilipinas has responded by increasing its benchmark interest rate to 4.5%, signaling that more hikes are likely on the horizon.
Rising energy costs, supply disruptions, and construction inflation have also weighed on occupier optimism. Many are reassessing expansion strategies, delaying relocations, scaling back fit-outs, and renegotiating leases to maintain flexibility in the face of uncertainty.
The impact on the real estate market has been significant, with average gross office yields decreasing to 6.70% in the first quarter. Prime assets in key areas like Makati and Bonifacio Global City remained stable, while non-prime assets faced higher vacancy risks and weaker demand.
However, certain sectors have shown resilience. Warehousing and industrial spaces have remained stable, driven by steady logistics demand and domestic supply chain requirements. Essential retail properties have also held firm, with stable occupancy and reliable rental income.
UMVA can exclusively reveal that investors and landlords are increasingly concentrating on these asset classes as safe havens, offering stability amid prolonged economic uncertainty. This shift highlights the growing importance of defensive property types in safeguarding cash flow and mitigating risk.
