Davao is turning to be a sweet spot for Information Technology (IT) and Business Process Outsourcing (BPO) ventures and investments, as the city in the south is more than ready to absorb the spillover of opportunities from the metropolis and opens its doors to urban development and a buoyant property market.
Local real estate consultancy firm KMC Mag Group, the Philippine associate of London-based property advisor Savills, made this observation in its website last week, as posted by KMC Mag’s analyst, Anna Maria Christina Marco.
Marco said Davao is emerging as a top BPO-IT destination in the country, as it offers a great blend of corporate environment and a laid-back countryside living in a tourist hotspot.
She pointed out that several micro-districts for the office sector have already been established in the area, just about three years after developers considered to tap Davao’s potential for office development.
Among these micro-districts are: the Lanang BizPark, Damosa IT Park, SM Lanang Premier, Davao Finance Center, Abreeza Complex, Pryce Business Park, Filandia IT Center, Matina IT Park, Matina Town Park, and the Felcris Centrale.
“With several BPO hubs and business districts developed throughout Davao, various contact centers have been set up in the city,” Marco wrote. “The BPO sector’s services have then expanded into data entry/transcription, software, graphics, and content development, as well as engineering and design. The service expansion has helped sustain the growth momentum for BPO and KPO (Knowledge Process Outsourcing) as well.”
For now, BPO companies Convergys, Concentrix, Ibex Global, and VXI Global have set up offices in Davao.
In 2013, according to Marco, the BPO office supply in Davao was approximately 66,000 square meters, and has grown steadily since then. She said there is now about 92,400 square meters of available office space in the city.
Given the robust office market, Marco foresees some 47,000 square meters of office space being added yearly to the present stock in the next couple of years.
“By 2017, the BPO office supply is anticipated to grow to as much as 139,800 square meters,” Marco said. “With this expansion in Davao’s office market, the city is poised to become a new BPO frontier.”
In the first half of the year, office vacancy rates in Davao rose to 15.89 percent, due mainly to the completion of new office spaces, according to Marco.
The market, she added, also awaits new office supply from major office developments, such as the 4,810-square-meter Ayala Business Center at Matina Town Square in the first quarter of 2016, the 14,000-square-meter Matina IT Park Building 2 in the third quarter of 2016, and the 28,620-square-meter Davao Finance Center at the Davao Park District in the fourth quarter of 2017.
Marco also noted that Davao offers investors a lower cost of doing business, since upper rental prices in the city are at around P480 per square meter, while the lowest net rental rate in the area is at P350 per square meter.
Marco said the challenge that the Davao office market faces is the need to build office developments that would cater to services other than the what the BPO industry offers.
“Landlords looking to building in Davao should focus on building BPO-ready office spaces, which won’t only cater to BPO firms, but will also be attractive options for other investments and businesses,” Marco pointed out. “These offices are designed to meet modern business needs and match the current office trends, focusing more on efficiency instead of the traditional setup.”
She further advised: “Developers should not just build offices with modern business amenities and 24/7 support facilities, but should also aim to create a live-work-play environment. Putting together various residential options, office spaces, shopping outlets, and leisure venues just in one easily accessible area would make Davao a forward-thinking BPO destination.”