Thursday, December 7, 2023

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Consistent expansion of property market observed beyond NCR region.


By Revin Mikhael D. Ochave, Reporter

KMC Savills, a brokerage and consulting firm specializing in REAL ESTATE, predicts ongoing development in property markets beyond Metro Manila due to the growth of the information technology and business process management (IT-BPM) industry in rural areas.

During a virtual briefing on Thursday, KMC Savills Managing Director Michael McCullough stated that the company predicts continued growth of IT-BPM companies beyond the National Capital Region (NCR).

The firm’s report on the future of regional cities in the Philippines includes Metro Cebu, Metro Clark, Davao, Iloilo, and Bacolod.

Mr. McCullough expressed excitement over the performance of provincial areas compared to Metro Manila. He noted that there has been a higher level of activity in these areas and attributed it to companies’ desire to be where they can find the most qualified employees.

Many individuals have relocated to their home provinces during the pandemic, prompting companies to follow suit. The availability of suitable office spaces, particularly those equipped with IT capabilities, at reduced rates has enticed businesses to establish offices in these areas where their employees reside. This not only decreases employee turnover but also decreases expenses. It is predicted that this trend will persist.

In addition to IT-BPM companies, various industries such as flexible office providers, e-commerce businesses, and logistics companies are also increasing their office space in provincial areas.

According to Cha Carbonell, Chief Operating Officer of KMC Savills, flexible office providers are gradually expanding in regional provinces due to the known demand for their expansion in those areas.

“Businesses in the e-commerce and logistics industries are expanding to regional areas and requiring satellite offices. The demand for office space is mainly driven by the IT-BPM sector, but other industries also contribute to the occupancy of office spaces in regional cities,” she stated.

According to the report, the real estate market in Metro Cebu is projected to be resilient against potential supply challenges due to the growing presence of the IT-BPM industry.

In the first half of the year, Metro Cebu had a vacancy rate of 20.9% and a total office space of 1.25 million square meters.

According to John Corpus, Executive Director of KMC Savills, the vacancy rate in Cebu is expected to reach pre-pandemic levels by 2025 due to an increase in demand.

According to KMC Savills, the vacancy rate in Iloilo City decreased to 8.1% in the first half of the year due to the completion of Cybergate Iloilo Tower 2 in Pavia. The city currently has a total office space of 209,700 sq.m.

According to KMC Savills, the vacancy rate for Grade B stock drastically decreased from 22.7% to 13.1% by the end of 2022. The report is positive about vacancy rates remaining below 10%, despite an additional 22,500 sq.m. of new office space in the latter half of 2023.

According to the report, Bacolod’s vacancy rate in the first half of the year was 13.5%, reflecting a decrease in demand. However, there is expected to be an improvement in the demand in the following quarters. The total office space available in the area is currently 187,128 sq.m.

KMC Savills predicts that leasing activity may increase in the upcoming quarters due to a potential overflow of demand from neighboring Iloilo. The conditions are anticipated to remain stable in the following term, but there has been a recent uptick in leasing activity.

KMC Savills reported that Davao’s total office space vacancy rate decreased to 6.4% in the first half of the year, compared to 12.1% at the end of last year. The city currently has a total of 231,384 sq.m. of office space available.

According to KMC Savills, Davao continues to be a cost-effective market despite the growing demand from outsourcing companies. Unlike other office markets in VisMin, Davao does not have a significant number of townships that can charge higher-than-average rates.

According to KMC Savills, the present trend in demand could potentially be a chance for developers to reconsider their approach in the area.

According to the report, Metro Clark has experienced a 33.6% vacancy rate during the first half of the year. The total office space available in the area is currently 432,058 square meters.

According to KMC Savills, office buildings located outside of Clark Freeport Zone had a higher performance with an average vacancy rate of 25.3% during the same time period. While the overall vacancy rate may be higher compared to certain submarkets in Metro Manila, leasing activity in Metro Clark has been stronger in the capital, but only in specific areas.

According to KMC Savills, the amount of office space in Iloilo, Bacolod, and Davao is not as large as in Metro Cebu or Metro Clark. However, due to a rise in demand, developers may build new high-quality office buildings or create new business districts in these areas.