NO NEW buildings were completed in the first nine months of 2020 in Metro Cebu, indicating the impact of the Covid-19 pandemic on office construction.
Property research firm Colliers International Philippines, in its latest market study, revealed that only about 37,300 square meters (sq.m) of new office space in Metro Cebu will likely be completed in the fourth quarter this year. Completion of some office buildings will likely be delayed to the first half of 2021 to 2022.
“From our initial estimate of about 100,300 sq.m. of new supply annually from 2021 to 2022, we now see the yearly completion of about 93,600 sq.m,” Colliers said.
Net take-up for Metro Cebu in the first nine months of 2020 turned negative.
Colliers said, “This is similar to the trend we see in Metro Manila wherein the vacated space outpaced the occupied offices during the period.”
Vacancies across business districts such as Mactan and Mandaue have been rising. Colliers said about 17,500 sq.m. of office space were vacated by Philippine Offshore Gaming Operators (Pogos).
“More office spaces are also being vacated as outsourcing firms and providers of English as Second Language services have been closing or downsizing office space requirements as they implement split operations (i.e. work from home arrangements complementing traditional office work) or loss of their offline (face-to-face) operations because of travel restrictions brought by the pandemic,” the report stated.
For the first three quarters of 2020, Colliers recorded a net take-up of -24,500 sq.m. This will likely result in a vacancy of 12.8 percent in 2020, up from 11.6 percent in 2019.
“The 12.8 percent vacancy will be the highest in Cebu since we started tracking data in 2007,” said Colliers.
Of the 16,900 sq.m. of deals recorded during the period, about 59 percent came from the outsourcing sector, followed by 38 percent from traditional occupiers. The outsourcing companies that took up space in the first nine months of 2020 include First Global Solutions, EHS Training solutions, Channel Information Technology Support and Leasing Services and Concentrix’s recruitment office.
To cope with the impact of the coronavirus pandemic, Colliers said landlords have been willing to accommodate occupiers’ requests by offering flexible lease terms, rental discounts and escalation-free periods.
Some landlords, for instance, have been willing to provide discounts ranging between 13 percent and 25 percent.
Meanwhile, the exit of Pogos in Mactan and Mandaue should also put downward pressure on rents.
Colliers said it sees lease rates in Cebu dropping by about five percent in 2020 as the office sector shifts to a tenants’ market and as landlords prioritize building tenancy over revenue.
“We project the downward pressure on rents to continue up to 2021. In our view, rates in key business districts such as Cebu IT and Business parks and their fringe areas are likely to post the fastest pace of recovery as we see occupants, particularly outsourcing firms, gravitating towards these business hubs,” the report said. / KOC