Makati CBD’s property market continues to thrive, driven by strong end-user demand, limited supply, and unwavering investor confidence. The business hub stands out as it remains resilient amid the condominium oversupply plaguing other parts of Metro Manila.
But despite the challenges in the capital region, it is important to highlight that not all business districts are affected by the slowdown; not all price segments are reeling from the condominium slowdown and definitely not all locations are impacted by the overhang. There are opportunities amidst the uncertainties and please allow me to dissect these through this article.
It is interesting to note that there are various demand drivers which we see stoking take-up in the Metro Manila condominium market beyond 2025. The Philippine economy remains a bright spot in Southeast Asia; we have a young workforce that continues to be employed by a thriving BPO sector; interest rate cuts implemented by the central bank should result in lower mortgage rates and these should make residential projects an attractive investment option; joint ventures between local and foreign developers are sustaining their attractiveness to the investing public; more remittances from Filipinos working abroad should help lift demand; and the government’s aggressive infrastructure program should stoke demand for properties in Metro Manila and eventually raise demand and result in higher property prices.
Not all locations are created equal
It is very important to explain that the ‘oversupply’ in the Metro Manila condominium market does not cover all sub-markets and price segments. The Makati (central business district) CBD, for instance, continues to be one of the most, if not the most, desired addresses of large, multinational firms and their employees. Makati houses not just expansive office towers but also high-end malls; some are even up for redevelopment which will only make residing within Makati CBD more attractive for top Filipino professionals and expatriates and their families.
Makati CBD is one business district in Metro Manila that continues to dominate in terms of total share to the more expensive condominium projects in the capital region. For the office segment, the business district continues to attract traditional and outsourcing tenants. As a result, office vacancies in the bustling financial district continue to remain relatively low at about 8.3% as of end-2024. This is much better than the Metro Manila-wide office vacancy of 19.8%.
MAKATI CBD SUSTAINS ATTRACTIVENESS AS OUTSOURCING DESTINATION
Colliers continues to see Makati CBD demand coming from various tenants. In 2024, we recorded leases from government agencies, banking and financial service providers, and IT companies locating in Makati CBD, among other attractive sites. We are now seeing firms providing AI software engineering and data protection services occupying space in Makati. Moving forward, we expect more high-value tenants locating in the business hub. Some AI software engineering and cybersecurity firms are also starting to occupy space in the business hub.
As I always highlight, it is crucial for a business district to attract these office locators as they are also likely to fuel demand for upscale residential projects that feature relatively larger cuts, more open spaces, sustainable features, and hotel-like amenities and interior design.
MAKATI CBD’S LIMITED UNSOLD INVENTORY
Latest data from Colliers Philippines show that Makati CBD accounts for less than 1% of total unsold ready-for-occupancy (RFO) condominium units in Metro Manila. This is a much better figure compared to unsold RFO inventory in Pasig, parts of Quezon City, Manila, and Parañaque. These areas covered nearly 60% of unsold RFO inventory in Metro Manila as of end-2024. This only supports our previous statement that Makati CBD remains one of the most preferred addresses not just in Metro Manila, but also across the country.
This clearly indicates that Makati CBD is NOT part of the so-called oversupply plaguing other parts of Metro Manila, especially those in the peripheries of major CBDs.
Colliers doesn’t see a sizable addition to Makati CBD’s RFO condominium stock. With other things being constant and with limited addition to total RFO supply in the business hub, we only expect pre-selling prices in Makati CBD to increase beyond 2025.
Given that Makati CBD has the lowest vacancy in the Metro Manila office market (8.3% versus the Metro Manila-wide vacancy of 19.8% as of end-2024) and one of the tempered vacancies in the residential sector (13.2% versus the 23.9% overall vacancy in the capital region as of end-2024 and significantly lower than the Bay Area’s 52%), we believe that Makati CBD remains exempt from the condominium oversupply narrative and is one business hub that is up for redevelopment.
MAKATI CBD PRIMED FOR FURTHER GROWTH
It’s interesting to note that Makati CBD has one of the largest supply of residential units, office space, and mall space in Metro Manila but it continues to stand out as it has one of the lowest vacancies in all three sectors (see graph). We see Makati CBD sustaining these competitive vacancy rates as it remains as one of the most preferred addresses in the capital region as foreign businesses, Filipino investors, and OFW buyers gravitate towards the CBD.
Makati CBD is definitely poised for accelerated growth. It will be interesting to see new office, condominium, and retail projects in the pipeline. Exciting times ahead for Makati CBD!
