Cebu office market set for recovery

The Cebu office market is poised for gradual recovery as it registered improved take-up in the first half of the year, a property services firm said.

“There is a positive net take-up of around 11,000 square meters (sqm) in the first half of 2021, which shows that the market is starting to recover,” said Gerard Thomas Padriga, Colliers’ General Manager for Cebu.

Demand came from an even mix of occupiers, with 39 percent of office transactions coming from traditional corporate occupiers (composed mainly of traditional companies, government agencies, and coworking spaces), 33 percent are business process outsourcing (BPOs), and 28 percent from knowledge process outsourcing (KPOs), Padriga said.

Office vacancy also slightly improved in the second quarter to 21.7 percent from 22 percent in the first quarter of the year.

Full-year vacancy rate, however, is forecasted to increase to 24.8 percent this year and further jump to 29.8 percent next year,mainly due to more office completions expected in 2022 and 2023, most of which are 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 to 19.8 percent in the second quarter from 20.6 percent in the first quarter of the year.

“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 increased from 28.2 percent to 38.2 percent, mainly due to new project completions,” Colliers said.

In terms of headline rates, CBP remained the most expensive among Metro Cebu’s major office markets, with rates ranging from P500 to P700 per sqm.

Padriga emphasized, however, that headline rates are still negotiable.

“Landlords nowadays are becoming more open in lowering down their rates to secure tenants,” he said.

“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,” he added.

Moreover, Padriga said a sustained and aggressive vaccination program will help drive the sector beyond 2021 as more people go back to the office.

He also cited that recovery in the global economy and the implementation of the CREATE Law as additional drivers that bodes well for the industry, as the quickly improving infrastructure developments in Metro Cebu.

Some of these infrastructure projects include Cebu Monorail, Cebu Bus Rapid Transit, Metro Cebu Expressway, and the highly anticipated Cebu – Cordova Bridge, which is due for completion in 2022.