Davao City entered late 2017 as the “King of the South” and the most competitive city outside Metro Manila. It ranked 3rd nationwide in the Cities and Municipalities Competitiveness Index and 2nd in Economic Dynamism, trailing only Makati. These rankings reflect a strong foundation built on business security compliance, efficient local governance, and a resilient economic structure.
From a labor standpoint, the city remains highly favorable for office-based industries. The region posted a 95.3% employment rate in July 2017, supported by a 64% labor participation rate. This is reinforced by approximately 8,332 annual graduates from leading universities, many of which hold CHED Centers of Excellence in IT, Business Administration, and Teacher Education. This steady talent pipeline continues to support ICT-BPO expansion and professional services growth.
Infrastructure development is a key long-term catalyst. Major projects such as the Davao City Expressway, Bypass Road, Coastal Road, Mindanao Railway, Davao-Samal Bridge, airport modernization, and transport upgrades are expected to significantly improve connectivity. These improvements are also projected to enhance land values and expand viable office corridors across the city. Large developers including SM Prime, Ayala Land, Megaworld, and Robinsons Land continue to expand their presence, supported by local government incentives that encourage decentralization beyond coastal zones.
Office Market Performance: High Occupancy and Strong BPO Demand
As of Q3 2017, Davao City recorded an average office take-up rate of 88% across key commercial districts. Poblacion leads with 95% occupancy, followed by Bajada-Lanang at 93% with 70,800 sqm of inventory, and Matina at 77% with 43,722 sqm.
Grade A office spaces dominate supply and maintain an 87% occupancy rate, primarily driven by BPO firms. Grade B assets are also stable at 77% occupancy. The tenant mix is led by ICT-BPO companies at 67% of total take-up (approximately 102,000 sqm), followed by professional services at 20%, government-related users at 10%, and general services at 3%.
Rental rates remain competitive, averaging PHP 565 per sqm in Poblacion and PHP 475 per sqm in Bajada-Lanang and Matina, with annual escalation rates of 5.56% to 5.61%. The near-term pipeline totals approximately 65,000 sqm through 2019, with 85% of new supply coming from Robinsons Land and Megaworld, and early pre-leasing activity already recorded.
Demand Drivers: Built for BPO Expansion
New developments are increasingly designed for ICT-BPO requirements, including large floor plates, 2.7-meter ceiling heights, fiber connectivity, 100% backup power, and high parking ratios. Build-to-suit arrangements are also gaining traction, allowing firms to customize office specifications. Integrated live-work-play townships are emerging, combining residential, office, and retail components to attract both talent and occupiers.
Outlook
Davao City’s office sector is positioned for steady and sustained expansion. Strong labor fundamentals, competitive operating costs, and continuous infrastructure investment will support long-term demand from ICT-BPO and professional services firms. With occupancy already at 88% and a limited near-term pipeline of 65,000 sqm, additional Grade A supply will be required to meet growing demand for modern, technology-enabled office spaces.
As transport infrastructure improves, office corridors along key expressways and transit nodes are expected to experience capital appreciation. Supported by strong BPO confidence and government backing, Davao is steadily transitioning from an emerging regional hub into a fully established business destination in Mindanao, offering long-term value for investors, developers, and occupiers alike.
