CEBU and Davao are facing different office market conditions as new developments approach completion, with Cebu recording lower occupancy amid additional supply while Davao prepares for a substantial expansion of its office inventory, according to property consultancy PRIME Philippines.
Cebu’s office occupancy fell to 81.1% in the third quarter from 84% in the first quarter, while Davao maintained a higher occupancy rate of 93.2%, PRIME said in its third-quarter real estate market briefing.
The consultancy said Cebu is accommodating additional office space as tenants consolidate operations or relocate to newer buildings, while Davao continues to face limited availability of quality office space ahead of a projected increase in completions.
“Cebu is seeing new office and warehouse supply coming to the market, particularly in emerging locations outside established core while demand remains resilient. Davao, on the other hand, continues to operate in a tighter supply environment particularly for quality office and logistic space,” PRIME Philippines Senior Head for Visayas and Mindanao Markets Hannah Yoshida said during the briefing.
CEBU FACES SUPPLY PRESSURES
Cebu recorded negative office net take-up of 29,400 square meters (sq.m.) in the third quarter, alongside the completion of 25,100 sq.m. of new office space, according to PRIME.
Net take-up measures the change in occupied office space over a given period, with a negative figure indicating that more space was vacated than occupied.
Ms. Yoshida attributed the adjustment partly to tenants consolidating their operations and reassessing office requirements, including efforts to improve efficiency and relocate to newer buildings.
“As we all know, occupiers are assessing all of their building footprints right now, and this is where the adjustment comes from, more on consolidation, efficiency, given our AI, the companies are very big on efficiency and they don’t really need that much space,” she said.
Despite the decline in occupancy, average monthly office rents increased by 3.1% from the first quarter to P665 per sq.m., according to PRIME’s press release.
The consultancy said Cebu’s office market is entering a period of increased competition among landlords as additional developments become available.
PRIME’s detailed market presentation showed approximately 117,000 sq.m. of office space remaining for completion in 2026 and another 130,000 sq.m. scheduled for 2027.
The incoming supply includes developments by SM Prime Holdings, Inc., Cebu Landmasters, Inc., and Grand Land, Inc.
Major projects include the 77,870-sq.m. Northwing Towers 1 and 2, the 13,825-sq.m. Astra Corporate Center, and the 19,000-sq.m. Grand Tower Cebu.
Ms. Yoshida said the upcoming developments include buildings seeking accreditation from the Philippine Economic Zone Authority (PEZA) and incorporating sustainability features.
She said PEZA-accredited developments could attract information technology-business process management (IT-BPM) companies and global capability centers (GCCs) considering expansion outside Metro Manila.
“For PEZA, we attract all these locators who are in the business process outsourcing (BPO) sector. Others are also in the GCC sector, given that after Manila, this is their next go-to location for expansion [with] high-skilled talent readily available to adapt to the needs of the capability centers,” she said.
Ms. Yoshida also said landlords’ flexibility on rental rates, office fit-out support, and lease terms could influence how quickly the additional space is occupied over the next 12 to 18 months.
DAVAO PREPARES FOR SUPPLY EXPANSION
In contrast, Davao’s office market recorded a 93.2% occupancy rate in the third quarter, with no new Grade A office completions reported for 2026, according to PRIME.
However, the consultancy expects the city’s office inventory to increase substantially as developers prepare to complete approximately 145,000 sq.m. of new space between 2027 and 2029.
The projected additions represent about 88% of the 166,000 sq.m. of office space completed in Davao from 2017 to 2025.
PRIME expects the developments to increase the city’s total office inventory by approximately 46% to 462,000 sq.m. by 2029.
Developers expected to contribute to the pipeline include SM Prime, Robinsons Land Corp., Megaworld Corp., DSG Sons Group, Inc., and Damosa Land, Inc.
Ms. Yoshida said the scale of the planned expansion would test the market’s capacity to absorb additional office space.
She added that absorbing the projected 145,000 sq.m. of new supply would require annual net take-up of approximately 48,000 sq.m. over the three-year period.
She also said newer Grade A developments could help attract occupiers, while older buildings might need to become more competitive in pricing and quality.
Meanwhile, office requirements in Davao reached approximately 19,000 sq.m. from January to September, up 73% from 11,000 sq.m. a year earlier, according to PRIME.
Of the total, 15,300 sq.m. was recorded in the third quarter alone.
Traditional corporate occupiers accounted for 63% of the requirements, followed by business process outsourcing firms at 20% and government agencies at 17%.
Ms. Yoshida said the composition of new office requirements differed from Davao’s existing occupancy profile, which remains dominated by IT-BPM companies.
According to PRIME, IT-BPM firms account for approximately 75% of the city’s occupied office space.
Average monthly office rents in Davao declined by 4.7% from the first quarter to P610 per sq.m., while minimum asking rates fell to P330 per sq.m.
PRIME expects rental rates to remain relatively firm as the market awaits additional Grade A developments, citing the limited availability of quality space.
Ms. Yoshida said the market could face upward pressure on rents in 2027, although rising construction and fuel costs could also influence developers’ completion schedules.
GROWTH BEYOND MAJOR HUBS
Beyond Cebu and Davao, PRIME said occupiers and investors are also considering secondary markets in the Visayas and Mindanao as they assess the availability of office space, labor, and operating costs.
Ms. Yoshida identified Iloilo, Bacolod, Cagayan de Oro, Dumaguete, and Bohol as markets with distinct demand drivers.
“Cebu and Davao are the established gateways of the Visayas and Mindanao, but I would like to acknowledge that they are not the whole story,” she said.
“There are also other areas like that of Iloilo, Bacolod, Cagayan De Oro, Dumaguete, and Bohol to each have their own demand drivers. As Cebu’s core fills up and Davao’s pipeline stays thin, occupiers and investors are asking where else to find talent, space, and reasonable costs,” she added. — Juliana Chloe A. Gonzales