Prospects of Cebu’s property sector are upbeat as it recorded a takeup of 11,000 square meters (sq.m.) in the first half of the year.
Property consultant Colliers Philippines said the Cebu office real estate sector “is set for a gradual recovery as the metro observed positive net takeup of office spaces for the first two quarters of 2021.”
Gerard Thomas Padriga, Colliers general manager for Cebu, said the “positive net takeup” for the period “shows that the market is starting to recover.”
Padriga said the sector recorded a slightly lower office vacancy rate in the second quarter at 21.7 percent compared with the first quarter’s 22 percent.
The full-year vacancy rate, however, is pegged at 24.8 percent and is likely to increase further to 29.8 percent next year, mainly due to additional office spaces flooding the Cebu market starting next year and by 2023.
Padriga said most of the supply are from projects stalled in 2020 due to the pandemic.
“Among Metro Cebu’s business districts, Cebu Business Park (CBP) performed relatively well, recording a decrease in vacancy rate from Q1 to Q2 (first quarter to second quarter) 2021 (20.6 percent versus 19.8 percent). Other areas such as fringe areas of CBP, the Cebu IT Park (CITP), CITP fringe areas, Mandaue, and North Reclamation were all stagnant, with the exception of Mactan, which saw vacancy rate increasing from 28.2 percent to 38.2 percent, mainly due to new project completions,” he said.
Padriga said in terms of headline rates, Cebu Business Park remains the most expensive among Metro Cebu’s major office space market, with rates ranging from P500 to P700 per sq.m.
“It should be noted, however, headline rates are still negotiable. Landlords nowadays are becoming more open in lowering down their rates to secure tenants,” he added.
“Most of the transactions that happened in CPB are those involving landlords that adjusted their rates accordingly, achieving a win-win scenario for both the landlord and their tenants,” Padriga said.
Demand comes from an even mix of occupiers, Padriga noted.
Of the total office space transacted in the first half of 2021, 39 percent are traditional corporate occupiers (composed mainly of traditional companies, government agencies, and coworking spaces), 33 percent are business process outsourcing, and 28 percent are knowledge process outsourcing.
Padriga said “a sustained and aggressive vaccination program will help drive the sector beyond 2021 as more people go back to the office.”
Colliers said for property owners to ride the challenges in the present market, office landlords should continue to offer flexibility, such as shorter lease terms, creative commercial structures, and pre-termination options, to reduce investment risk of occupiers.
Risk-sharing through tenant improvement allowance to reduce capital expenditure should also be explored by highlighting wellness features and certifications.
Property owners should also offer fully fitted spaces depending on tenants’ preference, focusing on “building amenities and incorporate post-COVID workplace best practices.”
