PROPERTY research firm Colliers International Philippines sees the continued expansion in the information technology-business process management (IT-BPM) industry to lead the office property recovery in Cebu as it navigates an environment clouded by the Covid-19 pandemic.
Colliers said while it sees a slower pace of leasing across the country in 2020, it believes that Metro Cebu will likely be among the first locations to recover as it remains a preferred destination outside Metro Manila.
Joey Bondoc, senior research manager at Colliers International Philippines, in a webinar on Thursday, June 24, 2020, said Cebu still managed to get a chunk of the outsourcing sectors in the country even in the midst of both global economic and health crises.
“In the recent statement by the Department of Labor and Employment, even during the Covid-19 pandemic and the lockdowns, a lot of companies are still announcing expansion plans and one of the cities that will be able to capture the new jobs created in the outsourcing sector is Cebu City,” he said.
Bondoc said the Covid-19 pandemic has since translated to slower leasing. Colliers sees office lease rates in Cebu declining by eight percent in 2020 before posting a three percent annual growth in 2021.
“In our opinion, the slowdown in office leasing is affecting not just Metro Manila but also key locations such as Cebu and Davao,” Colliers said in its market report.
However, the new outsourcing jobs should temper Cebu’s office vacancy, which Colliers sees dropping to 11.7 percent in 2021 from 12 percent in 2020. Colliers sees traditional and outsourcing firms dominating office space take-up in 2020.
“The recovery in absorption starting 2021 should result in lower vacancy,” it said.
Colliers also see rents recovering in 2021 as leasing activity picks up and occupiers respond to national and global recovery.
“Overall, Colliers sees a quicker pace of rental recovery among buildings located in Cebu IT and Cebu Business Parks and their fringes as new and expanding occupiers gravitate towards these locations,” said Colliers.
Construction
Moreover, the pandemic has temporarily put the brakes on the completion of construction projects this year. Colliers sees muted office completion in 2020.
“From our original projection of 129,000 square meters, we see completion plummeting to only 68,300 square meters,” Colliers said.
However, it sees “delivery picking up from 2021 to 2022 as developers respond to a rebound in take-up and space delayed in 2020 is completed during the period.”
Colliers expects Cebu IT Park and Cebu Business Park and their fringes to account for 77 percent of new supply from 2020 to 2022.
In 2019, Metro Cebu’s office stock reached 1.17 million square meters from 1.04 million square meters in 2018. A combined 43 percent of the new supply in 2019 was completed in the Cebu IT and Cebu Business Parks.
Safe and quality office space
Doing business under the new normal now requires landlords to put a premium on safe and quality office space.
“Similar to what we see in Metro Manila, occupiers are now placing a premium on the safety and quality of office spaces. The need to provide more office space per employee is likely to partly drive demand over the next 12 months,” Colliers’ market report said.
But aside from allocating larger spaces, Colliers believes that occupants are likely to prioritize sanitation, emergency preparedness and design considerations such as air circulation and glass ratio for natural sunlight.
Moreover, the pandemic has only raised occupants’ demand for green and health office spaces. (JOB, KOC)