While there is plenty of supply for office and industrial real estate in Luzon, particularly Metro Manila, key cities in the Visayas and Mindanao (VisMin) are seeing stronger demand for prime leasing space due to lower investment by developers despite the regions’ growing economies.

During a media briefing, property consultancy firm Prime Philippines Inc. noted that property development is booming in VisMin—particularly in Cebu, Bacolod, Cagayan de Oro, and Davao—amid growing decentralization away from Metro Manila.

Prime Philippines Vice President for Visayas-Mindanao Ruth Coyoca said second-tier cities are attracting capital because “what used to be considered secondary markets are now becoming strategic expansion markets.”

“For our BPO [business process outsourcing] and industrial clients, having an office in Visayas and Mindanao is now a strategic need for the sustainability of their operations,” Coyoca added. “So many of these cities are evolving into self-sustaining economic ecosystems, and this continues to attract occupiers because of the balance between talent availability and operating cost efficiency.”

Compared to Metro Manila, many of these regions continue to offer more competitive labor costs while maintaining access to a young and growing workforce.

“If you notice, population growth in the country's three main regions is slowing down. But Mindanao’s population growth is at 1.18 percent, which is higher than Luzon's. This signals to companies operating in these cities that they will not run out of talent,” Coyoca noted.

However, investments by property developers remain heavily skewed toward Luzon. Nevertheless, companies are expected to eventually pivot to Visayas and Mindanao in recognition of this growth-to-investment gap.

In Metro Cebu, new office spaces are quickly being absorbed by a market hungry for Grade A buildings, while most of the current 13.2 percent vacancy rate consists of older developments. Coyoca noted that average lease rates in Cebu are rising as tenants seek higher-quality buildings that still offer competitive rates.

Meanwhile, Cebu has the lowest warehouse vacancy rate among the country’s industrial hubs at 1.05 percent, with newer developments on track to create new hotspots in areas such as Balamban, Danao, and Naga. Cold-storage vacancy sits at just 2 percent.

In Davao, the city is expected to swiftly absorb approximately 85,000 square meters of new office supply slated for completion within the next four years. Because no new supply entered the market last year, Davao has become the country’s only landlord-favorable office market, currently boasting the nation's highest occupancy rate at 95.5 percent.

Bacolod, on the other hand, is riding on its consumption-driven economy, with a strong focus on retail development and service-led sectors. This positions it as one of Western Visayas’ most closely watched emerging cities.

Prime Philippines reported that retail giants Robinsons Land, Megaworld, and Rockwell are converging on Bacolod, with approximately 100,000 square meters of new mall space coming online over the next three years.

While the city's office market recorded a 25.3 percent vacancy rate in the first quarter, Prime Philippines noted that its newer developments “have displayed notable leasing velocities, indicating a potential gap between supply quality and demand requirements.”

The consultancy firm also stated that Bacolod’s limited supply of Grade A warehouses positions the city for rental growth as more premium spaces are introduced, attracting interest from multinationals and fast-moving consumer goods (FMCG) operators.

Cagayan de Oro also faces a limited supply of office space, making it ripe for commercial expansion as new developments are introduced. Coyoca said the city’s occupancy rate of 74.84 percent highlights a mismatch between existing, mature inventory and the specific requirements of BPO occupiers. At the same time, significant investments are being poured into the city’s cold-storage sector amid burgeoning port activity.

However, growth in VisMin is not limited to just these four areas. As Coyoca pointed out: “Based on our experience and the requirements we're getting from our clients, they are also looking toward Bohol, Dumaguete, and even as far as GenSan, Zamboanga, and, of course, Iloilo City.”

“These are the hotspots and emerging cities that our clients from the BPO, industrial, and logistics sectors are looking for," she added. "The decentralization story is no longer limited to just major regional capitals; it is becoming much broader than that.”