Davao office property softens; opens opportunity for stakeholders

Davao City’s office property sector offers opportunities for stakeholders over the long term as the region recovers and transitions to the next normal, says real estate services and consultancy firm JLL Philippines.

In its latest thought leadership event, JLL presented the market overview and current trends in Davao City’s office sector to help organizations reimagine the region’s growth and re-assess their real estate strategies to take advantage of emerging opportunities.

Leading the discussion were JLL Philippines’ Head of Research and Consultancy Janlo de los Reyes and Damosa Land, Inc.’s Senior Vice-President Ricardo Lagdameo. They were later joined by Mark Villorente, President of the Association of Mixed-Use Property Developers (AMPD) and Antonio Sabarre, JLL Philippines’ Director for Commercial Leasing.

De los Reyes demonstrated that in the past five years, an annual average of 25,000 square meters of office space have been completed in the city, proving how it has emerged to be one of the key urban centers outside Metro Manila, especially with the entry and growth of the BPO sector in the country.

“The stable economic conditions helped funnel a lot of businesses here, leading to the growth of office supply in recent years. Investors also saw that the talent pool is comparable to what they found in Metro Manila,” said de los Reyes.

However, there will be an absence of additional supply in the next three years as most office developments of around 155,000 square meters are slated to be completed by 2024 and beyond.

“Even though vacancy rate is currently high, demand is projected to rebound when the market recovers. The limited supply in the next three years presents an opportunity for some developers to re-evaluate their completion dates and project plans to take advantage of this demand recovery and lack of competition within the next three years,” he said.

In fact, lease transactions grew by 28% per annum in the last 10 years, with majority of the demand driven by offshoring and outsourcing (O&O) firms, but later diversified by traditional office occupiers and flexible workspaces.

Likewise, many BPO firms, especially those that are heavily concentrated in Metro Manila, are currently looking for satellite offices, with Davao City as one of the key areas in consideration.

"One of trends highlighted by the pandemic is that investors have learned to spread their portfolio. Some businesses are now looking at decentralizing and establishing alternative office spaces in areas closer to where people live rather than people go to them," said Sabarre during the panel discussion. “Davao City, as one of the country’s real estate hotspots, will benefit from this trend.”

Lastly, de los Reyes highlighted the role of mixed-use developments or townships in Davao City’s resiliency and growth. More than 60% of pipeline supply are seen to be located within townships.

“Townships offer different types of complementary developments, which allows investors to spread the risk as townships allow them to bank in other sectors if one is not doing well. For consumers, they have access to different kinds of developments in one cohesive ecosystem,” he explained.

“Given all these opportunities—together with the upcoming completion of infrastructure developments in the region such as the Mindanao Railway, Davao Airport expansion, and modernization of Sasa Port—we are optimistic about the future of Davao City’s office real estate market,” de los Reyes concluded.

Watch the replay of the webinar here: https://www.jll.com.ph/en/campaign/ph-real-estate-overview.

JLL Philippines regularly holds knowledge-sharing events and publishes thought leadership pieces on the latest trends and insights in the real estate market. To know more, follow JLL’s social media pages on Facebook and LinkedIn.

JLL has been operating in the Philippines since 1997 as a 100% wholly owned entity and currently manages about 5.3 million square meters of real estate with a workforce of over 1,300 employees. With more than two decades of local expertise working hand-in-hand with its global legacy, JLL provides to the Philippine real estate market an unparalleled synergy of services with a strong commitment to achieve real estate ambitions through future-ready approaches. For further information, visit www.jll.com.ph.