Collier’s Review: VisMin’s bountiful investment opportunity

Cebu and Davao stand out as prime investment destinations in the Philippines.

Cebu has the largest residential and office stock outside of the capital region while Davao offers the biggest office and residential supply in Mindanao.

National and homegrown developers continue to seize opportunities in these two areas and we attribute this to the residents’ improving purchasing power, rising remittances from Filipinos working abroad, improving infrastructure connectivity, and the availability of skilled manpower, including those employed in the outsourcing sectors.

This column looks at these two attractive property hotspots and why developers continue to invest heavily in Cebu and Davao. This piece also explores the growth prospects for these two localities beyond 2024.

Cebu’s bustling office market

Cebu supplies the largest office stock outside of Metro Manila. It goes without saying that the locale is a primary option of outsourcing firms that are planning to expand outside the capital region.

Interestingly, there are higher value knowledge process outsourcing (KPO) companies that first opened shop in Cebu before setting up offices in Metro Manila. This indicates the Queen City of the South’s attractiveness as an outsourcing hub.

Colliers Philippines has observed that outside Metro Manila, Cebu remained the top choice for outsourcing firms and multinational companies. It led in terms of provincial office space take-up in 2023, with a total of 65,800 sqm.

Despite a strong net take-up, vacancies remain elevated due to new supply which is expected to persist over the next 12 months.

Colliers believes that shared services, healthcare companies and other multinational firms are likely to occupy more office spaces in this location. We see stronger net take-up in 2024.

Overall, Cebu remains one of the most attractive and dynamic property investment destinations in the Philippines. Hence, it is no longer surprising to see property firms aggressively landbanking and launching new projects within the city and its environs.

Cebu ready for upscale, luxury dev’ts

Cebu remains one of the most attractive and largest residential hubs outside Metro Manila.

National developers continue to launch in Metro Cebu as they are optimistic about the locale’s potential for growth even beyond 2024. In our view, improving sentiments from businesses, investors and end-users will likely support the growth of Cebu residential sector.

Colliers believes that the market for upscale and luxury residential units in Cebu is likely to expand so developers should further test investors and end-users’ appetite for these units. Land values in Cebu City have been rising so property firms should look for alternative sites for development.

Developers should likewise explore launching more resort-themed projects which are becoming more popular these days, along with serviced apartments and condotels. These projects are backed by a steadily growing travel and tourism sector.

Davao’s office opportunities are ripe for the picking

Davao is one of the most competitive cities in Mindanao, making it a preferred location of multinational outsourcing companies. The city is also regarded as one of the safest localities in the region, an appealing proposition for expatriates.

Colliers Philippines believes that the city’s skilled manpower will continue attracting outsourcing locators. This should be supported by the strong coordination of the city’s business groups, information and communications technology (ICT) councils, and academe.

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Among the outsourcing firms already operating in Davao include Optum, IQor, Ibex, Teleperformance, and Awesome OS. We continue to receive queries from outsourcing firms and we expect these leasing plans to materialize in the next 12months.

Colliers is also optimistic that the city will see more integrated communities, which should result in the construction of newer and more sustainable office spaces. Tenants should be on the lookout for the completion of these high quality office spaces, especially as they firm up their hybrid work arrangements for their employees.

Davao: Ideal hub for wealth storage in Mindanao

Davao is likely to retain its stature as one of the most competitive residential markets in Mindanao.

Colliers Philippines believes that the entry of national players in Davao has paved the way for a massive development of integrated communities.

Hence, we recommend that players continue with their landbanking initiatives and capitalize on the city’s improving infrastructure backbone.

Residential developers should further test the market and even diversify, especially with the rising viability of upscale and luxury projects. Developers should take advantage as well of the revival of appetite for both vertical and horizontal projects. Like Cebu and other attractive property investment destinations, developers in Mindanao should explore launching leisure-themed developments.

We have seen an aggressive launch of township developments outside Metro Manila as developers take advantage of the growing interest from occupants to expand in provincial locations. Colliers recommends that developers assess the viability of Davao for more integrated communities featuring residential, office leisure, and retail components.

Breakthroughs

There’s no doubt that Visayas and Mindanao are experiencing property development breakthroughs. As developers ramp up their geographic diversification, Colliers is positive that Cebu and Davao are two localities that will benefit from property firms’ aggressive project launch and innovation outside the capital region.