Talent, infrastructure boost regional offices

SKILLED talent availability and infrastructure development are driving growth in the regional office market, according to real estate services firm KMC Savills, Inc.

“[It] is labor driven, driven by the graduate pools,” Joe Curran, chief executive officer of KMC Savills said during a virtual briefing on Thursday last week.

“Some clients of providers will want them to be outside Metro Manila,” he added.

Additionally, they have business continuity requirements, ensuring that if infrastructure in Manila fails, they can quickly operate in Davao or Cebu, he noted.

Mr. Curran also said the firm still sees many captive shared services centers that would like to locate in the traditional business districts within Metro Manila due to the “comfort level” of being in the capital and having access to a mature talent pool.

Likewise, Cha Carbonell, chief operating officer of KMC Savills, noted the correlation between the number of graduates produced by certain regions and the office take-up in these areas.

The information technology and business process management sector still holds the largest market share in take-ups.

She said net take-up in Metro Cebu reached 39,000 square meters (sq.m.) in the first half of 2024, Metro Clark at 19,000 sq.m., and Davao’s office market saw a “significant” upturn with net take-up totaling 12,400 sq.m.

Meanwhile, Bacolod maintained a consistent net take-up of 3,700 sq.m. during the same period.

Ms. Carbonell said the regional markets will still see demand increasing in the next quarters, which will lower the vacancies.

Iloilo had the highest vacancy rate at 28% for the first half of 2024, followed by Metro Clark at 26% and Bacolod at 23%. Meanwhile, Metro Cebu fell to 15% and Davao at 9%.

“The Visayas office market, in particular, demonstrated strong growth, led by Iloilo’s addition of 105,200 sq.m. of office space with Cebu set to surpass this by 2025,” the firm said.

KMC said while cities like Bacolod and Davao are seeing “positive momentum,” Metro Cebu and Metro Clark faced slowdowns due to limited supply.

Cebu is expected to surpass Iloilo with an additional 143,800 sq.m. of office supply by the end of 2025, it said.

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

In terms of rents, KMC said Iloilo and Bacolod have experienced a decline in rental rates, while Davao, Metro Clark, and Metro Cebu saw increases. — Aubrey Rose A. Inosante