SOUTHEAST ASIA OUTLOOK 2025

Southeast Asia Outlook 2025: Long-Term Growth Prospects Remain Intact

Key Property Data

PIPELINE SUPPLY OVER CURRENT INVENTORY RATIO (%)

RENTS Q4 2024 (PHP PSM PM) 2025 FORECAST

VACANCY Q4 2024 (%) 2025 FORECAST

CURRENT INVENTORY (MILLION SQM)

PIPELINE SUPPLY (MILLION SQM)

CAPITAL VALUE OUTLOOK 2025

OFFICE (CBD GRADE A) RETAIL (METRO MANILA) PRIME LOGISTICS (ISLANDWIDE) RESIDENTIAL (LUXURY CONDOS)

997

17.0

9.76

0.72

7.7%

2,000

20

9.9^

1.0^

10.1%

570

0.5

1.50**

0.11

7.3%

1,050

5.0***

32,000 units

1,000 units

3.1%

Source: Cushman & Wakefield Research Gross Floor Area of mid and high-end shopping centers in Metro Manila ** Warehouses and Standard Factory Buildings (SFBs) in Metro Manila ***Vacancy Rate of Private Residential Units in Metro Manila

PHILIPPINES MARKET SNAPSHOT

Occupier Market Commentary and Recommendations Office: The prevailing high vacancy in the market is a result of ongoing uncertainties, including the continued implementation of hybrid work setups, amendments to existing legislation, and the total ban on offshore gaming operators. Despite this, headline rents for Prime

international retailers’ activities remain moderate due to the overall bleak global market situation. Prime Logistics: Revised US tariffs may disrupt trade and supply chains, but robust e-commerce growth, cold storage demand, and automation adoption signal transformative opportunities in industrial real estate, requiring strategic policies, infrastructure upgrades, and targeted investments to position the region as a global investment hub. Residential: Rents are expected to be stable, while capital value is expected to increase further in 2025, as interest rates remain elevated.

and Grade A developments in the main CBDs have remained steady in the medium term. Additionally, more spaces at a discount with finished/semi-finished conditions are becoming available. Retail: The pandemic and post-pandemic era have witnessed a noticeable deceleration in the delivery of new retail space supply. The recently completed and forthcoming retail space supply primarily stems from long-delayed completions and expansion projects, while

Economy Ongoing uncertainties may delay market recovery as stakeholders assess the impact of potential US trade tariffs. This could slow Philippine GDP growth due to significant bilateral trade with the US, negatively affecting key export industries and revising the GDP forecast to the lower end of the government’s 6%-7% range. Conversely, the enactment of Republic Act No. 12066 (CREATE MORE) and the Real Property Valuation and Assessment Reform Act is expected to mitigate the impact of potential higher US tariffs by supporting local industries and attracting foreign investments. The Bangko Sentral ng Pilipinas’ resumption of the easing cycle through its recent move to cut policy rate to 5.5% is expected to boost private investment and support household consumption, to enable faster economic recovery and mitigate possible impact of revised US tariffs.

Investment Opportunities And Recommendations Investment sales in 2025 could be challenging as hurdle rates for sellers remain elevated compared to the expectations of buyers. However, the volume of transactions in the premium/luxury market is likely to increase as investors take advantage of moderately high interest rates and more prevalent mild asset repricing. In particular, investment volumes in established CBDs may increase. Relatively unaffected by the flight of offshore gaming companies, assets located in CBDs exhibit strong, stable cash flows, which may attract investors seeking reliable income. Alternative asset classes, including data centers and cold-chain logistics, continue to navigate the high-interest rate environment and global market disruptions to attract investors and developers. For instance, global foreign direct investment (FDI) rose by 11% to $1.4 trillion in 2024, although it fell by 8% when excluding flows through European conduit economies. As retailers focus on securing strategic spots within prime retail areas, with an emphasis on sustainability and the integration of local culture and design into new shopping venues, investors and developers can make deliberate efforts to modernize essential shopping centers to cater to the evolving needs and desires of consumers. Recent legislations such as the Real Property Valuation and Assessment Reform Act (RA 12001), the CREATE MORE Act (RA 12066), and Streamlining the Permitting Process for Infrastructure Flagship Projects (EO 59) hasten the permitting process for flagship infrastructure projects, lower corporate income tax, and standardize property valuation. These reforms create a stronger framework for transparency and efficiency, enhancing the Philippines’ appeal as a prime destination for global real estate investments. Recent Significant Deals

Key Market Developments KEY INFRASTRUCTURE/ECONOMIC DEVELOPMENTS (EXPECTED COMPLETION) • Metro Manila Subway Project - Phase 1 (Valenzuela to Ortigas): 2029 - Phase 2 (Ortigas to NAIA Terminal 3): 2031 • North-South Commuter Railway - Phase 1A (Manila-Malolos): June 2025 - Phase 1B (Malolos-Clark): 2029 - Phase 2 South Extension (Manila-Calamba): 2031 • MRT Line 7 (2028) • Light Rail Transit Line 1 Cavite Extension Phase 2 (Parañaque-Bacoor, Cavite): 2031 • New Manila International Airport (TBD)

TYPE

IMPLICATIONS / AREAS TO WATCH • Improves mobility in the major cities and central business districts (CBDs) in Metro Manila further boosts demand across property segments. • Establishment of railway connection between the regions of Metro Manila, Central Luzon and CALABARZON. • Catalyst for further development of northern and southern regions.

• Infrastructure

• Infrastructure

• Decongest Metro Manila and attract investments as well as overall business activities in Bulacan and nearby provinces.

PRICE (MIL USD) / US $PSF

PROPERTY NAME BUYER

SELLER

PROPERTY TYPE

NET YIELD (%) DATE

Development site in Parañaque City Development site in Fringe

Development Site/ Hotel Development Site/ Mixed-use

Source: Cushman & Wakefield Research

Ferronoux Holdings Inc.

Eagle 1 Landholdings Inc

74 / 73 psf

-

Q4 2024

BCDA, Robinsons Land

BCDA

60 / 90 psf

-

Q3 2024

Source: RCA, Cushman & Wakefield Research

28

29

CUSHMAN & WAKEFIELD