OFFICE building owners in Cebu should invest in upgrading aging properties instead of relying on rental discounts to remain competitive as new office developments enter the market, property consultancy CBRE said.
It warned that tenants have become more selective in a softer leasing environment.
CBRE said about 31 percent of Cebu’s available office inventory is now more than 10 years old, while 35 percent is between six and 10 years old and 34 percent is less than five years old, underscoring the need for landlords to modernize existing assets as fresh supply comes onstream.
The consultancy said Cebu’s office market is contending with rising vacancies, cautious occupiers and a pipeline of new office towers expected to intensify leasing competition in the coming quarters.
“Playing defense” has become the priority for landlords, with retaining existing tenants now more important than aggressively pursuing new ones, MJ Castro, CBRE’s head of Operations for Property Management, said during the firm’s second-quarter 2026 market briefing in Cebu.
“Older buildings don’t have to be outplayed by new developments,” Castro said. “What’s critical is having a clear asset management plan and making the necessary improvements to remain competitive.”
Assessments
Instead of offering steeper rental concessions, he said landlords should undertake technical assessments, address deferred maintenance, modernize common areas, replace aging air-conditioning and mechanical systems, and improve operational efficiency to reduce common area charges.
Castro said occupiers are increasingly evaluating office locations based on total occupancy costs rather than headline rental rates alone, making operating expenses, building efficiency and maintenance standards key considerations in leasing decisions.
CBRE said tenants are also using the age and condition of buildings as leverage during lease renewal negotiations, seeking not only lower rents but also commitments from landlords to upgrade facilities.
The consultancy warned that prolonged vacancies are becoming more expensive for building owners because unoccupied floors continue to generate maintenance, security and utility costs while producing no rental income.
Castro said landlords should reassess long-vacant spaces and consider renovations, flexible workspace conversions or alternative uses that could generate revenue instead of leaving floors idle.
The recommendations come as Cebu prepares for a significant increase in office supply later this year, including major projects outside traditional business districts.
Reposition assets
CBRE said owners of existing office buildings have only a limited window to reposition their assets before the additional inventory heightens competition.
The consultancy also encouraged landlords to pursue environmental, social and governance certifications, noting that multinational occupiers increasingly consider sustainability credentials alongside location, rental costs and building quality when selecting office space.
Despite recording the highest provincial office net take-up at 9,200 square meters in the second quarter, Cebu’s leasing market remained subdued. Vacancy rose to 13.9 percent from 13.7 percent in the previous quarter, ending five consecutive quarters of improvement.
CBRE expects vacancies to rise further as about 30,000 square meters of shadow office space in Cebu IT Park returns to the market, together with thousands of square meters of newly completed office space before year-end.
With occupiers enjoying greater bargaining power amid abundant supply, CBRE said landlords who invest in upgrading older assets will be better positioned to retain tenants than those relying primarily on price concessions. (KOC)