JLL Philippines said the coronavirus disease 2019 (Covid-19) pandemic softened the demand for office spaces in Davao, while majority of the supply is seen to be completed after 2023.
In a webinar on Friday, the global real estate services firm said that much like the rest of the country, the Davao office market was also affected by the pandemic.
Janlo de los Reyes, JLL Philippines head of Research and Consultancy, also reported that an absence of office space supply for the area is seen for the next three years.
“Most of the office developments that we’ve seen are estimated to be completed post-2023 and this is around 155,000 square meters (sqm) of office projects in total,” he explained.
The pre-commitment level for the office segment also declined as take-up in upcoming developments only registered at 3.5 percent, which is reflective of the weakened demand in the office market as a whole.
De los Reyes emphasized, however, that pipeline projects still observe 13-percent rent premium over existing developments despite the weak pre-commitment level.
JLL also highlighted three emerging trends for the office segment in Davao.
De los Reyes said that the limited office space supply in the next three years serves as an opportunity for developers and market players.
The firm also sees a more diversified demand profile for the area in the next couple of years, led largely by outsourcing and offshoring companies, followed by traditional occupants and flexible workspaces.
De los Reyes said more business process outsourcing (BPO) companies would look to expand outside Metro Manila, and Davao is among the key areas being considered.
Lastly, JLL sees more than 60 percent of the pipeline supply of the Davao office market to be located within townships.
De los Reyes reiterated that Davao promises a lot of opportunities, especially since more infrastructure projects are in the pipeline including the Mindanao Railway Project, the expansion of the Davao Airport and the modernization of the Davao Sasa Port.
JLL said Davao has seen an annual average growth of 25,000 sqm of office space in the past five years, driven by the growth and entry of the BPO sector in the area.