Office Supply Increase Leads to Rising Vacancies, Lower Rents
The regional office market across the Philippines saw significant improvement in 1H 2024, driven by ongoing development and the completion of numerous buildings. 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. While cities like Bacolod and Davao are experiencing positive momentum, Metro Cebu and Metro Clark faced slowdowns due to limited supply. Rental rates in Iloilo and Bacolod have dropped, reflecting rising vacancies, while Metro Cebu, Clark, and Davao saw increases driven by strong demand.
Cebu is expected to surpass Iloilo with an additional 143,800 sq m 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.
Metro Cebu and Metro Clark saw a decline in office space absorption during 1H 2024 compared to 2H 2023. Net take-up in Metro Cebu totaled 39,000 sq m, while Metro Clark recorded 19,000 sq m. In contrast, Bacolod maintained a consistent net take-up of 3,700 sq m during the same period.
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. Iloilo’s rents dropped 8.68% year-on-year to PHP 574.4/sq m due to rising vacancies, a trend expected to persist. Metro Cebu had the largest rent increase, with a rise of PHP 7.5, bringing the rent to PHP 552.7/sq m. Davao observed a slight increase in rental rates due to strong demand and limited supply.
Iloilo’s vacancy rate hit 28% in 1H 2024 and is expected to rise with 106,000 sq m of new office space this year, likely lowering rental rates further. The district’s recent development and upcoming construction are expected to attract more locators and current tenants seeking new office space.
