Quality warehouse shortage keeps Manila rents elevated

Modern logistics facilities are commanding premiums as domestic demand and limited quality supply keep occupier competition high, with rental growth expected to moderate only after further stock is absorbed.

Manila’s logistics rents are likely to remain elevated as occupiers compete for modern warehouse space, whilst older facilities increasingly rely on lower prices to attract tenants.

Claro Cordero Jr., Director for Research, Consulting & Advisory Services at Cushman & Wakefield Philippines, said warehouse take-up has risen 31% year on year, with leased warehouse space surpassing office space for the first time. Third-party logistics and distribution operators account for roughly 68% of demand.

“Demand is basically running after quality supply, especially in the Philippines,” Cordero said.

Unlike more export-dependent markets, Philippine logistics demand is largely supported by domestic consumption. Supply is also tight in key growth corridors, where Cordero said only about 8% of total vacancies are located. Rising construction costs are putting additional pressure on rents for new stock.

Occupiers are increasingly seeking modern, purpose-built facilities, driving demand towards built-to-suit and pre-committed developments whilst speculative construction remains measured.

The divide is reflected in rents. Older stock in Cavite commands about PHP206 per square metre, compared with roughly PHP320–PHP330 for newer facilities in Batangas. Metro Manila rents can reach approximately PHP600 per square metre monthly.

“Modern, well-located, powered assets command both the rent premium and the tenant loyalty, while secondary stock increasingly competes on price alone,” Cordero said.

The market currently comprises roughly 9 million square metres of warehouse space. Cordero estimated that another 10%–20% of existing stock could be absorbed before rental growth starts to moderate.

Central Zone and Calabarzon account for roughly 20%–30% of the current development pipeline. Despite incoming supply, Cordero expects demand to continue exceeding the availability of quality facilities in the near term, keeping rental pressure concentrated on modern warehouses.