The ongoing conflict in the Middle East is reshaping the Philippine real estate market by driving up construction, energy, and financing costs while forcing developers and investors to rethink expansion strategies amid heightened global uncertainty, according to property consultancy Cushman & Wakefield.

In a May 4 report titled “How the Middle East Conflict is Reshaping the Philippine Real Estate Market,” Cushman & Wakefield said that disruptions to global energy transit routes, particularly through the Strait of Hormuz, have intensified economic volatility and inflationary pressures that are directly affecting the country’s property sector.

Because the Philippines remains heavily dependent on imported energy, Cushman & Wakefield noted that higher oil prices were translating into rising operational and construction expenses across the property market.

According to the report, elevated energy costs were feeding directly into higher prices for construction materials, freight and delivery, labor deployment, building utilities, and project site operations.

“For developers, this creates margin pressure at both the pre-construction and execution stages,” the report said.

The consultancy noted that projects initially planned under earlier cost assumptions may now require revised feasibility studies, phased implementation, or procurement adjustments.

Cushman & Wakefield also observed a growing shift toward advanced supply ordering, as developers, contractors, and occupiers attempt to secure construction materials early to hedge against further price increases and potential shipping delays.

“This approach supports cost visibility, but it also raises working capital requirements and warehouse needs. In practical terms, inflation risk is now influencing procurement strategy as much as design and financing strategy,” the report said.

As such, the consultancy expects “a temporary constriction in the new supply pipeline as developers reassess project viabilities.”

Still, the report noted that reduced competition from delayed projects could benefit owners of existing prime assets.

Despite mounting macroeconomic risks, Cushman & Wakefield said several segments of the Philippine property market continued to demonstrate resilience.

The report noted that the information technology and business process management (IT-BPM) sector remained a major source of stability for office demand.

“While the conflict may tighten global client budgets, it concurrently drives demand for cost-effective outsourcing solutions,” the report said.

According to Cushman & Wakefield, the Philippines remains “a highly preferred destination for global firms looking to optimize operational expenses.”

The consultancy added that elevated local fuel costs could also encourage companies to adopt hybrid work arrangements, prompting occupiers to reconfigure office footprints for greater efficiency.

Meanwhile, rising fuel prices and ongoing supply chain disruptions were increasing demand for logistics and industrial facilities.

“Companies are transitioning from just-in-time inventory models to just-in-case strategies, demanding larger warehousing spaces near major transport nodes to guard against future disruptions,” the report noted.

Cushman & Wakefield also said inflationary pressures were expected to sustain demand for high-end residential properties as affluent buyers sought tangible assets as a hedge against inflation.

However, the consultancy warned that mid-market residential developments could face pressures from affordability constraints and possible interest rate increases.

The retail, tourism, and hospitality sectors were likewise expected to face headwinds as higher transport and energy costs weakened consumer purchasing power and raised aviation fuel expenses.

“As households allocate a larger share of their income to essential goods, discretionary spending will likely contract, impacting retail mall revenues,” the report said.

Cushman & Wakefield added that higher aviation fuel costs could “temporarily dampen international visitor arrivals and delay hospitality expansions.”

The report also noted that rising inflation could delay expected interest rate cuts as central banks attempt to contain supply-driven price pressures.

“For real estate investors, elevated borrowing costs require a careful re-evaluation of entry and exit assumptions,” the consultancy said.

Still, Cushman & Wakefield noted that big-ticket infrastructure projects such as Metro Manila Subway and North-South Commuter Railway (NSCR) continued to support investor confidence and capital flows into the Philippines despite geopolitical risks.

“While energy price volatility and inflation present undeniable hurdles, the Philippine market offers robust opportunities within prime logistics, high-end residential, and IT-BPM-driven office spaces,” the report said.