Cebu still preferred by BPO firms expanding outside Metro Manila
CEBU led other provincial sites in terms of office space take-up, with over 7,000 square meters (sq.m.) recorded in the first quarter of 2023, despite lower deals recorded for all key outsourcing destinations outside Metro Manila.
This indicates that Metro Cebu remains one of the most attractive expansion hubs for outsourcing firms in the Philippines, according to the latest industry report by Colliers Philippines.
During the first three months of the year, Cebu’s office market saw a net take-up of 7,900 sq.m., lower than the 49,700 sq.m. recorded in the fourth quarter of 2022, as new office spaces totaling 41,400 sq.m. entered the market.
Colliers expects an annual delivery of 91,300 sq.m. from 2023 to 2025, with the Cebu Business Park and Cebu IT Park in Cebu City accounting for 51 percent of the new supply.
Despite the additional inventory, Colliers projects net take-up to reach 40,000 sq.m., as Cebu continues to be “the preferred option of outsourcing firms looking to expand outside Metro Manila due to the availability of high-quality office spaces, skilled manpower, and relatively cheaper lease rates.”
“Metro Cebu is ripe for shared services and multinational companies as they take advantage of the existing skilled labor and infrastructure. With this, landlord should capture the demand by introducing high quality office buildings in their pipeline,” said Kevin Jara, associate director of Office Services – Tenant Representation, in a statement.
Office transactions
Office deals in Cebu reached 16,100 sq.m., accounting for 55 percent of the total provincial transactions of 29,200 sq.m. Outsourcing firms continued to dominate these transactions, comprising 60 percent of the total deals in Metro Cebu.
Notable transactions include spaces taken up by Dexcom, BPO Seats and Cloudstaff, all occupying spaces in Cebu Business Park.
Office transactions outside Metro Manila totaled 29,200 sq.m., a 37 percent decrease from the 46,300 sq.m. recorded a year ago.
The vacancy rate in Metro Cebu reached 23.2 percent in the first three months, higher than the 21.7 percent posted in the previous quarter due to the completion of new office spaces during the period.
By the end of 2023, Colliers said it expects the vacancy rate to reach 23.1 percent as pre-commitment levels remain low, especially among upcoming buildings.
“We expect rents to continue to decline due to high availability of office buildings as well as low pre-commitments from new and upcoming supply,” Colliers said. “Firms that are expanding and are looking at occupying more expansive office spaces should use this time as an opportunity to negotiate for favorable rates.”
Similar to Metro Manila, Colliers highlights the opportunity for Cebu-based firms, including business process management firms, to implement flight-to-value strategies by occupying new and quality office spaces at attractive rates, given the province’s abundance of quality office spaces.
Moreover, existing occupiers, particularly shared service providers and multinational companies with headquarters in Metro Manila, may want to reconsider and include Cebu in their business continuity plans due to its mature infrastructure and skilled labor pool.
During a recent visit to Cebu, Jack Madrid, president of the Information Technology and Business Process Association of the Philippines, expressed optimism for the industry, expecting 2023 to be a good year with the addition of 100,000 new jobs, bringing the total full-time employees to 1.7 million and revenues to $36 billion by year-end.