A steady pool of skilled labor and the increasing government investments in the provinces are attracting office space development outside Metro Manila, property consultants said.
Property consultant Colliers noted a “pronounced shift” to the suburbs by office space locators particularly business process outsourcing (BPO) companies in an effort to capture the “highly skilled, quality workforce” these cities have.
Joey Bondoc, Colliers Philippines head of research, in a briefing on March 19 said among the key locations are Bulacan where developers like Megaworld Corp. are doing landbanking activities, betting on the increased economic activities to be generated by the planned New Manila International Airport.
Bondoc said plans to further extend the North-South Commuter Railway to Capas, Tarlac from Clark will unlock the property values in rail system, all the way down from Calamba, Laguna.
Going down south of the Philippines, Bondoc said preferred areas are Cebu, Iloilo, Bohol and Negros — par-ticularly Bacolod — in the Visayas, and Davao in Mindanao.
“But an interesting location is Cagayan de Oro. In fact, we are also seeing very strong pickup for office space in Cagayan de Oro. So that is one location that we need to watch out for,” Bondoc said.
Iloilo vs Bacolod
Jie Espinosa, CBRE Philippines country head for advisory services, in a report said BPO locators keep a 75:25 ratio of distribution of their operations between Manila and the provinces.
Espinosa has forecasted “a lot of transaction shift” to Iloilo and Bacolod compared to Cebu given the incoming supply in the Western Visayas province but at an “almost similar rents” between Iloilo, Bacolod and Cebu.
“Most of the transaction rates there are almost the same, mostly in the P500 per square meter (sq.m.) range (per month),” said Espinosa.
According to CBRE, office space locators in Iloilo were attracted by the infrastructure and economic activities in the area.
KMC Savills, another property consultant, in a market update released March 21 noted the significant growth in Iloilo’s office market in 2024 with the addition of 105,900 sq.m. of new supply, bringing the city’s total stock to 306,800 sq.m.
“This expansion enabled Iloilo to surpass Davao City, which currently holds 252,000 sq.m. of office space,” KMC Savills said.
As for rental rates, it said only Davao City whose rental rates stood at P495 per sq.m per month regis-tered growth among key locations in southern Philippines, albeit marginal, in 2024.
KMC Savills attributed the growth to “low vacancy rates and a constrained supply pipeline with limited new developments forecasted before 2026.”
“Conversely, Iloilo experienced the most significant decrease, reaching P572 per sq.m. per month, a 7.3 per-cent decline from P617 last year. This decrease is expected to persist due to high vacancy rates with the new supply,” KMC Savills added.
In 2024, Bacolod’s rates also fell to P398 per sq.m. as its office market continued to face challenges in attracting new entrants to the district.
“Cebu’s average office rental rate reached P548.7 per sq.m. per month. Cebu IT Park saw a slight decrease of 1.1 percent in rental rates. With new supply expected to increase vacancy rates, the average rental rate is pro-jected to stabilize around P550 per sq.m. per month,” the property consultant said.
Expansion of footprint
KMC Savills said the BPO industry’s expansion beyond Metro Manila is not only characterized by new entrants to regional hubs, but also by existing companies expanding their footprint, taking up multiple floors ranging from 3,000 to 8,000 sq.m.
A total of 115,000 sq.m. of office space was delivered across three key regions — Cebu, Iloilo and Bacolod — during the second half of 2024, a 16 percent increase from the first half’s 99,137 sq.m., it added.
“The office market pipeline remains robust with approximately 220,300 sq.m. of new office space expected to enter the market in 2025, potentially leading to elevated vacancy rates across key cities. However, the limited new supply projected for 2026 is anticipated to help stabilize and gradually reduce these vacancy levels as de-mand catches up with supply,” KMC Savills said.
