PLAYERS in Cebu’s real estate industry are adopting new ways of doing business as the Covid-19 crisis takes its toll on the local economy.
During a Cebu property webinar hosted by leading property expert Santos Knight Frank on May 7, 2020, representatives from the real estate sector identified strategies that range from work-from-home schemes to repurposing facilities which will help continue doing business and maximize real estate assets while ensuring the health and safety of employees and the community.
Organized in partnership with the American Chamber of Commerce of the Philippines Visayas Chapter (AmCham Visayas), Santos Knight Frank’s online panel discussion focused on Cebu’s property market outlook and Covid-19’s impacts.
Industry experts included Kling Lacson, director for occupier services and commercial agency in Santos Knight Frank Cebu; Jan Custodio, head of research and consultancy of Santos Knight Frank; Jason King, president of King Properties; Jun Sa-a Jr., managing director of Cebu’s IT-BPM Organization (CIB.O); Franco Soberano, executive vice president and chief operating officer of Cebu Landmasters Inc.; and Brian Connelly, president of AmCham Visayas and general manager of the Marco Polo Plaza Cebu. The panel was moderated by Rick Santos, chairman and chief executive officer of Santos Knight Frank.
Cebu property market in a glance
Having contributed 6.5 percent of the country’s gross domestic product (GDP) in 2018, Cebu is an important investment destination outside Metro Manila and a key economic hub in the Visayas region. However, with both a global pandemic and economic crisis happening at the same time, the “double black swan” events have affected the outlook for residential and commercial real estate in Cebu.
In the short term, the current market situation may put immediate pressure on office rents in Metro Cebu and cause delays in companies’ expansion plans. The crisis will also have dramatic effects on retail as shopping malls have shut down during the enhanced community quarantine. Meanwhile, decline in primary residential sales is also expected during the quarantine period as buyers prioritize liquidity and activities such as unit inspections are not possible.
Landlord responses
As the pandemic drove businesses to either stop or continue operations through a work-from-home scheme, real estate players have reported disruption in cash projections, sales and construction projects. Developers and landlords have been devising new systems with respect to physical distancing and health and disinfection requirements.
Jason King of King Properties said companies should prioritize the health and safety of employees and key stakeholders, assessment of liquidity position to ensure business resiliency for the next few months and re-evaluation of timelines for ongoing projects.
“We feel a responsibility for every one of our stakeholders: employees, contractors, suppliers, construction workers,” added Franco Soberano of Cebu Landmasters. “It’s all about picking the right baskets right now and having a game plan not just for 2020 but for the coming years.”
Need for healthier buildings
Cebu Business Park and Cebu IT Park remain as attractive destinations for occupiers. More foreign companies are looking to outsource in the Philippines, especially in Metro Cebu, in their bid to cut costs.
“While majority of BPO companies are doing more work-from-home setups, companies are also spending more just to remain operational as they provide hotel accommodation, transportation and other needs to employees who opt to work in the office,” said Jun Sa-a Jr. of CIB.O, the IT-BPM industry association in Cebu. Post-ECQ, Sa-a projects that 30 to 40 percent of the workforce will continue to work from home.
In the long term, occupiers will be more conscious of the impact of the workplace environment on the health, safety and well-being of their employees. The need for enhanced indoor environment quality and a focus on healthier office buildings are expected.
“The concept of ‘healthy,’ well-managed buildings used to be a ‘nice-to-have,' but now a ‘must-have,’” said Rick Santos of Santos Knight Frank. “Part of this should have continuous contact tracing for employees to feel safe and compelled to go back to work as the office sector is and will continue to be an important sector for businesses.”
Repurposing facilities
¬¬With Cebu known as a key tourist destination in the Philippines, the tourism and hospitality sector in Cebu ¬¬is one of the hardest-hit industries by the crisis’ effects. Developers have come up with other uses for their properties to continue operating. Some have converted their facilities to serve as alternative sites of operations of BPO companies as well as employee housing.
Brian Connelly of Marco Polo Plaza Cebusaid the hotel opened its doors to host BPO employees whose offices are based around the area. There are also opportunities to turn function rooms and spaces into workspaces and expand the offering of its retail center with more essential grocery needs.
Opportunities in the new normal
There are opportunities in other real estate sectors such as industrial and logistics. “The industrial and logistics sector remains a bright spot for Cebu, driven by the shift to e-commerce and the continuous demand for essential goods,” said Santos.
To overcome current challenges, Santos Knight Frank emphasized the need to come up with a win-win scenario between landlords and tenants. “Landlord-occupier partnership is a long-term relationship. During these difficult times, both should be able to understand, listen and be flexible to survive and thrive in this crisis,” said Kling Lacson of Santos Knight Frank.
Ultimately, real estate players should not only prioritize liquidity, but also pivot their businesses to new opportunities and continue to stay resilient despite all odds. (Sponsored Content)