JLL Philippines sees Metro Cebu achieving greater stability in office leasing activity, increasing opportunities for investment, and servicing heightened demand in logistics and sustainability solutions.
In JLL Philippines’ real estate market overview event for Metro Cebu, speakers presented insights and trends in the office, capital markets, industrial and logistics, and sustainability sectors
Metro Cebu Real Estate Market Overview: Availability, Accessibility, Accountability in Real Estate was hosted and moderated by Joey Radovan, JLL Philippines’ country head, and featured presentations from JLL Philippines’ business line heads, as well as Elke Kornalijinslijper, JLL Southeast Asia’s Head of Energy & Sustainability Services.
In the office segment, Janlo de los Reyes, JLL Philippines’ head of Research and Strategic Consulting, provided an overview of Metro Cebu’s office sector for the first half of 2022.
“The market is stable but there is uneven performance in the office sector, wherein there has been a mix of stability and lackluster performance across indicators,” De los Reyes said.
In Metro Cebu, office leasing volumes post moderate take-up in the second quarter of 2022, closing at 23,825 square meters (sq.m.) in gross leasing volume.
Information technology-business process management (IT-BPM) companies continue to drive leasing activity, accounting to 67.3 percent as of the first half of 2022, while non-IT-BPM industries such as publishing, finance and banking, maritime technology, and engineering and architecture account for a cumulative 32.7 percent, JLL said.
IT-BPMs contributed to 4,600 sq.m. of move-ins in Cebu IT Park, and 4,300 sq.m. of move-ins in Cebu Business Park.
On a positive note, office pull-outs and rightsizing slow down, with the first half of 2022 getting a 79.25 percent decrease compared to the second half of 2021.
“Pull-outs have slowed down to around 9,872 sq.m. where we saw around 2,300 sq.m. BPM pull-out and 800 sq.m. corporate pull-out,” de los Reyes said.
Vacancy remains elevated but has eased to around 21.9 percent from a peak of 23.7 percent in the fourth quarter of 2021.
“We saw the improvement from Cebu IT park while Cebu Business park registered an uptick,” de los Reyes said.
Despite this, there is still weak precommitment levels where majority of upcoming stock remains vacant, which may pull-up up the already elevated vacancies.
De los Reyes expects office rentals to remain soft owing to supply pressure from the sizeable volume of unoccupied future stock.
Office rentals saw no movement at P632 per sq.m. per month.
P. Ryan Isip, JLL Philippines’ head of Capital Markets, presented to guests a snapshot of projects for investment in Metro Cebu, including future supply for offices, real estate investment trusts (REITs), resorts and casinos, and residential developments.
Isip cataloged Philippine Stock Exchange-listed developers and REIT companies, and names nine Cebu assets infused to REITs.
Going over key business districts: Cebu Business Park, Cebu IT Park, Mandaue, and South Road Properties, Isip said “land values have dramatically risen since the 1990s and will continue to rise.”
Isip named six investment trends observed over the course of 24 months : opportunistic acquisitions, hotel and hospitality, tenants reevaluating footprint, yielding asset, data centers, and industrial and logistics.
“The logistics market in the Philippines is still in the early stages of growth, and there’s positive sentiment in a growing market,” said Charlie McNaught, JLL Philippines’ director for Logistics & Industrial.
McNaught presented key factors that underpin market momentum–positive demographic forces, seismic shift in consumer spending patterns, and ESG (environmental, social and corporate governance) commitments.
E-commerce and logistics companies remain key sources of demand in Southeast Asia.
Global e-commerce spend is projected to be more than 35 percent of global retail sales by 2030. “There is an opportunity to introduce Grade A logistics to meet the demands of occupiers, as a lot of them improve their supply chain models and become more conscious of their ESG commitments,” McNaught said.
JLL sees the Philippine logistics market experiencing an exponential growth, with a projected 3.06 million sq.m. by 2025 and 4.80 million sq.m. by 2030 for Grade A and B logistics facilities. Logistics frameworks are also moving away from the linear model of retailer to shopping center to consumer, to a more omnichannel approach which places emphasis on factors such as next day deliveries, last mile delivery hubs, and increased level of returns which all equate to further demand for warehousing.
McNaught said JLL expects strong demand met with more prime stock, local and International Investment, older stock to be refurbished or redeveloped, ESG and automation, and growth of subsectors such as cold storage, self-storage, and urban logistics, all offering excellent short to medium-term growth potential.
Sustainability
Nix Garchitorena, JLL Phlippines’ Energy & Sustainability Services manager said that developers must consider the entire life cycle of a building as the built environment accounts for 40% of the total carbon emissions, with a third coming from the construction phase.
Garchitorena outlined steps to decarbonize assets to increase capital value and occupier benefits, as well as to future-proof buildings.
She encouraged strengthening partnerships between landlords and occupiers to achieve net-zero, saying “Pressures from investors, occupiers, employees, and regulators will remain. Hence, pushing further on sustainability to address and mitigate climate-related risks can help businesses attain resiliency and success.”