The office market outside Metro Manila continues to show promise, with upcoming office space supply in regional cities projected to reach 335,000 square meters (sq.m.) by 2025, according to KMC Savills.
In its latest Regional Office Briefing for 2H 2023 KMC Savills provided a snapshot of the office market in Cebu, Clark, Davao, Iloilo, and Bacolod for the second half of 2023.
The report said Iloilo leads the upcoming supply in the regional office market, and is poised to overtake Davao in office stock, though it will still lag behind Metro Clark.
Iloilo will contribute 50 percent of the upcoming supply driven by a remarkable expansion in the province.
According to KMC Savills, The regional office market remains promising due to growing demand from IT- BPM firms which are notably expanding in areas with accessible and reliable talent pools, such as Metro Cebu and Metro Clark.
Overall, Iloilo maintained its leadership among regional cities despite a decrease in rental rates to P 617 per sq.m. by the end of 2023.
In the latter half of the year, Davao’s office market experienced a slight rent increase due to limited space availability. Similarly, Metro Clark’s office market thrived with robust space absorption, leading to a modest rise in rental rates.
Conversely, Bacolod experienced a decline in rental prices due to stagnant office markets in its districts. Despite high occupancy in Iloilo, BPO companies are seeking labor and real estate savings on rent to support business expansions outside Metro Manila, a trend observed in other regional locations as well.
The rising supply in Iloilo is expected to temporarily drive down rental rates until the excess stock is absorbed. However, a contrasting projection is forecasted for Davao, where rental rates are expected to modestly increase due to low supply and sustained demand.
In 2023, Metro Cebu rental rates bounced back, recovering from the dip in 2022 which can be primarily attributed to the lack of activity in the Cebu fringes.
SM Clark and Aeropark continue to dominate Metro Clark’s office market due to high occupancy rates in the vicinity which could be attributed to the buildings’ convenient and strategic location.
