Regional office market improves in first quarter

CEBU, Philippines — The regional office market across the Philippines experienced notable improvement in the first quarter of 2024, fueled by ongoing developments and the completion of several new buildings.

According to a recent report by real estate services firm KMC Savills, the Visayas office market showed robust growth, with Iloilo adding 105,200 square meters of office space, and Cebu expected to surpass this by 2025.

While cities like Bacolod and Davao are gaining momentum, Metro Cebu and Metro Clark faced slow growth due to limited supply.

The report also indicated that rental rates in Iloilo and Bacolod declined, reflecting rising vacancies, whereas Metro Cebu, Clark, and Davao saw rent increases due to strong demand.

The company expects Cebu to surpass Iloilo with an additional 143,800 square meters of office supply by the end of 2025. Bacolod, Metro Clark, and Davao also have upcoming office spaces, with Bacolod completing two buildings during this period.

Metro Cebu is anticipated to see an increase in office space transactions due to its popularity for business expansion.

Both Metro Cebu and Metro Clark saw a decline in office space absorption during the first quarter of 2024 compared to the second quarter of 2023.

Net take-up in Metro Cebu totaled 39,000 square meters, while Metro Clark recorded 19,000 sq m. In contrast, Bacolod maintained a consistent net take-up of 3,700 square meters during the same period.

KMC Savills observed that the office market trends vary across different regional cities. Iloilo and Bacolod experienced a decline in rental rates, while Davao, Metro Clark, and Metro Cebu saw increases.

Meanwhile, Iloilo s rents dropped 8.68 percent year-on-year to P574.4 per square meter due to rising vacancies, a trend expected to persist.

Metro Cebu had the largest rent increase, with a rise of P7.5, bringing the rent to P552.7 per square meter.

Likewise, Davao observed a slight increase in rental rates due to strong demand and limited supply.

Iloilo s vacancy rate hit 28 percent in the first quarter of 2024 and is expected to rise with 106,000 sq m of new office space this year, likely lowering rental rates further. Iloilo s recent development and upcoming construction are expected to attract more locators and current tenants seeking new office space.

Founded in 2008 by prop-tech entrepreneurs Gregory Kittelson, Michael McCullough, and Amanda Rufino-Carpo, KMC Savills is an award-winning real estate services firm recognized as the  Best Property Consultant and Best Real Estate Agency  in the Philippines.

The company employs over 200 employees directly involved in office and retail space transactions, industrial listings and locations, investments, residential properties, asset management, research, consultancy, and valuation services.