By Victoria “NIKE” De Dios
With the upward trajectory in the demand for real estate property in the Philippines, whether as long term investment or quick return, the construction boom will support this gap.
According to KMC Savills’ Regional Office Briefing, the outlook for the country’s top cities of Cebu, Clark, Davao, Iloilo, and Bacolod remain resilient and are bound to reach the pre-pandemmic level in terms of demand.
Speaking in the briefing, KMC Savills Executive Director John Corpus discussed the general situation in Metro Cebu and h said, “The market is expected to withstand any supply pressure as the IT-BPM sector increases its presence in regional cities. Due to the recovery in demand, Cebu’s vacancy rate is forecasted to return to pre-pandemic levels by 2025.”
The country’s leading real estate brokerage and consultancy firm, also pointed out that the Cebu Fringe will likely delay this as the lack of leasing activity persists. However, they do not discount the possibility that a brisk upswing may happen if inventory in CBD and CITP decline rapidly. While In Metro Clark, the market continues to struggle with its vacancy rate rising to 33.6% in 1H/2023 as one of the few remaining vestiges of the POGO sector leaves. Office buildings outside of CFZ have performed better with their vacancy rate averaging 25.3% in the same period. Although the overall vacancy rate is higher than some submarkets in Metro Manila, leasing activity in Metro Clark has been healthier in the capital – albeit at specific locations only. In Davao, KMC Savills Associate Director Joshua De Las Alas reports that the city’’s overall vacancy rate dropped to 6.4% from 12.1% at the end of 2022.
The market has continuously outperformed expectations after the vacancy rate peaked at 21.9% in 3Q/2021. Davao remains one of the most affordable markets in the country amidst the influx of demand from outsourcing firms. Unlike the other office markets in VisMin, Davao still lacks a sizeable cluster of townships that can command above-average rates. However, KMC Savills forecasts that the current demand trend may be an opportunity for developers to rethink their strategy in the region.
In Iloilo, KMC Savills Chief Operating Officer Cha Carbonell shared that the city’s overall vacancy rate rose to 8.1% after the completion of Cybergate Iloilo Tower 2 in Pavia. Grade B stock saw a massive drop in its vacancy rate to 13.1% from 22.7% at the end of 2022. The report is optimistic that vacancy rates should remain in single digits despite another 22,500 sq m of new office space in 2H/2023.
In Bacolod, market occupancy remained low with a vacancy rate of 13.5% as demand continued to struggle. Leasing activity may improve in the coming quarters as demand is expected to spill over from neighboring Iloilo. Conditions are expected to be static in the next term, but leasing activity has picked up in recent months. The report does not discount the possibility of demand accelerating in 2024 due to the tight conditions in Iloilo. Given how quickly demand poured into its neighboring city, similar action by the market is expected in Bacolod.
Overall, KMC Savills reports that the total office stock in Iloilo, Bacolod, and Davao are not as sizeable as Metro Cebu or Metro Clark, however, the increased demand for these markets should trigger developers to construct new Grade A office buildings or introduce new business districts. KMC Savills is optimistic that these markets will continue to grow with the expansion of the IT-BPM sector outside Metro Manila.