Davao’s office market is entering a major expansion cycle, with more than 80,000 square meters of premium Grade A office inventory expected to enter the market by 2029, according to a special market report by Prime Philippines.
The upcoming office pipeline signals growing investor confidence in Davao’s long-term positioning as one of the Philippines’ emerging regional business hubs, driven largely by sustained expansion from the information technology and business process management (IT-BPM) sector.
IT-BPM Industry Continues to Fuel Demand
Prime Philippines’ report highlights that the business process outsourcing sector is expected to account for 35% of office demand, while the information technology segment contributes another 25%.
This trend reinforces Davao’s increasing attractiveness to occupiers seeking operational diversification outside Metro Manila and Cebu. As companies continue exploring regional expansion strategies, Davao presents a compelling combination of:
- Competitive labor markets
- Improving infrastructure
- Strong local economic activity
- Lower operational costs compared to major metropolitan centers
In the first quarter alone, major IT-BPM companies including Alorica, Concentrix, Connext, ibex, iQOR, SixEleven, and VXI collectively occupied approximately 284,000 sq.m., representing 75% of the city’s total office supply.
The sustained absorption reflects how regional cities are becoming increasingly critical to the country’s evolving office market landscape.
Major Developers Strengthen Presence in Davao
The expansion pipeline is also being driven by some of the country’s largest property developers.
Robinsons Land Corporation is projected to lead the office expansion wave through the launch of Cybergate Victoria, which is expected to add over 25,000 sq.m. of gross leasable office space beginning in 2027.
Meanwhile, SM Prime Holdings and Megaworld Corporation are also preparing additional office developments that could push Davao’s total office inventory to approximately 381,000 sq.m. by 2029.
The continued entry of institutional-grade developments suggests increasing maturity within Davao’s office sector, particularly as occupiers demand higher-quality workspaces with modern infrastructure and ESG-aligned features.
Occupancy Remains Strong Despite Incoming Supply
Despite the upcoming influx of office inventory, market fundamentals remain healthy.
Davao’s office market recorded a 96% occupancy rate in 2025, improving from 95% in 2024. Vacancies also tightened to approximately 12,000 sq.m., down from 15,000 sq.m. the previous year.
According to Prime Philippines, total net take-up reached around 10,000 sq.m. in 2025 even without new supply entering the market — a strong indicator of organic demand growth.
For investors and landlords, this suggests that Davao’s office sector may still possess room for further expansion before oversupply concerns emerge.
Rental Rates Expected to Rise
As new Grade A developments enter the market, Prime Philippines projects lease rates to range between PHP 500 to PHP 900 per square meter by 2029.
Average lease rates are also expected to rise to approximately PHP 640 per square meter, up from PHP 610 recorded last year.
The anticipated increase reflects:
- Strong occupier demand
- Improving office quality
- Growing institutional developer presence
- Increasing market segmentation between premium and older office stock
This could create stronger opportunities for landlords capable of offering modern, flexible, and strategically located office environments.
Why Davao Matters in the Philippine Office Market
Davao’s growth story increasingly mirrors the broader decentralization trend shaping the Philippine office sector.
As Metro Manila faces rising costs and intensifying competition, regional cities with strong economic fundamentals are emerging as attractive alternatives for both occupiers and developers.
Prime Philippines notes that Davao’s improving fiscal productivity, expanding infrastructure, and sustained IT-BPM growth continue to strengthen its long-term investment appeal.
For businesses exploring regional expansion, the city is gradually evolving from a secondary option into a strategic operational hub.
Source: BusinessWorld Article Source
