Philippine launch pause thins contractors’ pipeline as public work dries up
Philippine developers have chosen to sit on new launches, and in an ordinary year contractors could treat that as a pause between cycles. This year the timing is poor. Government spending on construction contracted 32.4 per cent in the second quarter, and the country’s cement makers said in May that they were not seeing much demand from the bigger property developers. A thinner private pipeline now leaves the construction trade with neither of its main customers buying at full strength.
Property consultancy Colliers Philippines said in its latest report that residential launches and take-up slowed in the first half as developers became more cautious about adding supply. It blamed weaker economic growth, elevated borrowing costs and geopolitical uncertainty. Office leasing softened too, as occupiers delayed expansion and investment decisions. Joey Roi Bondoc, research director at Colliers Philippines, described the tempered office and residential launches as ‘a much needed and strategic pause’.
The growth figures behind that caution are stark. The economy grew 2.3 per cent in the second quarter, according to Philippine Statistics Authority data published on 7 August, down from 2.8 per cent in the first quarter and 5.4 per cent a year earlier. Outside the pandemic, it was the weakest quarter in more than 16 years. First-half growth averaged 2.6 per cent, below the government’s revised target of 3.5–4.5 per cent for 2026.
A gap that reaches the site later
For contractors, a deferred launch turns into a missing construction start only after a delay. Where a project depends on pre-selling, work on site trails the sales campaign, so this year’s order books still carry projects launched earlier. The shortfall lands later, in the very period when contractors had hoped public works would be recovering. Developers have not disclosed how many launches they have shelved, which makes the size of that hole hard to price.
Where the shortfall will fall is clearer. Colliers said new supply in Metro Manila remained limited because of a still-sizeable number of unsold units, particularly in the Bay Area and areas surrounding Makati, and cited condominium oversupply in some submarkets, elevated vacancy levels and regulatory bottlenecks. Developers are unlikely to start new towers in districts where their existing units remain unsold. That points to a lull in high-rise work in the capital that ends only when the inventory clears, whatever happens to rates or growth.
Demand that does exist sits at the cheaper end. Units priced between 1.8 million and 3.6 million Philippine pesos (about $29,000–$58,000) accounted for about two-thirds of Metro Manila condominium take-up in the first half, Colliers said, with the economic and affordable segments strongest. Bondoc said fewer launches in Metro Manila were being offset by continued launches outside the capital region, particularly horizontal developments in Luzon, the Visayas and Mindanao.
That changes the shape of the work as well as its volume. Horizontal estates call for different crews and a more scattered pattern of deliveries than towers, and lower-priced units leave thinner margins for the builders and suppliers that serve them. A contractor organised around Metro Manila high-rises gains little from a subdivision in Mindanao unless it already has a regional presence, whereas a materials distributor with provincial depots is better placed.
Rates are the driver that has to turn
Of the drivers Colliers names, borrowing costs look the stickiest. The Bangko Sentral ng Pilipinas (BSP) raised its target reverse repurchase rate by 25 basis points to 5 per cent in August, its third consecutive increase of the year and a cumulative 75 basis points since April. Headline inflation eased to 6.1 per cent in August from 6.2 per cent in July but remained above the central bank’s 3 per cent target and its 2–4 per cent tolerance band.
Bondoc also traced the slowdown to the Middle East conflict, which he said pushed up fuel prices, ‘subsequently increasing the cost of construction materials in the Philippines’. Dearer inputs squeeze the margin on any new project and give developers a further reason to wait.
With inflation this far above the band, the BSP has little room to cut soon, and a mortgage-financed buyer feels the rate directly. Growth could turn first, but a better GDP print does not clear unsold units in the Bay Area. Launches in the capital need lower rates to revive take-up and enough take-up to absorb existing stock. Provincial horizontal launches are likely to recover first, and that is the part of the pipeline contractors should plan around.
Suppliers felt the squeeze early. John Reinier Dizon, president of the Cement Manufacturers Association of the Philippines (CeMAP), said in May that manufacturers expected demand to be flat or post a single-digit decline this year because of weak government spending amid the flood control controversy. He said government accounts for about 40 per cent of demand for cement and construction materials, that procurement had become stricter and the budget reduced, and that higher prices had also hurt demand. Individual home builders were still buying.
Construction as a whole declined 14.8 per cent in the second quarter, pulling gross capital formation down 9.2 per cent, while industry declined 2.4 per cent. In scale, the public slump is the larger blow to contractors. The residential deferral removes the private work that might otherwise have cushioned it.
Offices thin the pipeline, factories partly refill it
Commercial building offers little relief, with Metro Manila office transactions falling 24 per cent quarter on quarter in the second quarter as occupiers deferred leasing decisions, and office transactions outside the capital posting their weakest first half since 2022. Slower leasing feeds through to fewer office launches and less fit-out work, compounding the residential gap for contractors that work across both.
Industrial property is the exception. Colliers said demand stayed strong in the first half, citing semiconductor, food and beverage, fast-moving consumer goods, electric-vehicle and fibre-cement manufacturers, and expects Central Luzon to be a major contributor to new industrial space beyond 2026. For contractors with the capability, factory and warehouse work is the most dependable private pipeline in the near term.
Arsenio Balisacan, secretary of the Department of Economy, Planning, and Development (DEPDev), indicated that relief is coming. The Department of Budget and Management began releasing mobilisation funds for 2026 infrastructure projects to the Department of Public Works and Highways (DPWH) towards the end of June, he said, and the DPWH started awarding contracts in June and July. He expects public construction to begin picking up in the third quarter and called the slowdown ‘transitory, temporary’.
The arithmetic is demanding, and Balisacan said the economy needs to grow 4.4 per cent in the second half to meet the 2026 target. If awards gather pace, contractors regain their biggest customer while developers wait. If the catch-up stalls under tighter procurement, the private pause and the public slump overlap for longer, and suppliers carry the heavier loss of volume.
The signals to track are Colliers’ take-up in the 1.8–3.6 million pesos band, sales of unsold stock in the Bay Area and around Makati and DPWH contract awards. Rates will decide when Metro Manila towers return, and inventory will decide where.