OFFICE MARKET. Photo shows the Cebu IT Park, home to major outsourcing companies. Office leasing in Cebu’s business parks is expected to recover once market sentiments improve, although vacancy is generally projected to increase next year. (Photo courtesy of Cebu IT Park)
CEBU CITY – Vacancy in Cebu’s office market is projected to further pick up next year as market conditions continue to weigh on demand.
“Cebu continued to be hampered by the business environment brought about by Covid-19,” real estate consulting firm KMC Savills said in its latest market research.
The average vacancy rate in Cebu jumped to 14.8 percent in the third quarter of 2020, KMC data show.
New vacancies were found across all Cebu’s business centers, with Cebu Business Park and fringe areas (those outside the business parks) adding 9,588 square meters (sqm) and 8,810 sqm of available space, respectively.
With new office projects slated to open in the next quarters, higher vacancies are expected in the short-term.
Cebu’s average rents continued to slide, contracting by 0.5 percent year-on-year to PHP582.4 per sqm a month.
“Rental rates in Cebu may further diminish as the market deals with the additional supply in the coming months,” KMC noted.
While business activity here has started to improve, market conditions may continue to wane.
Despite the 190,000 sqm of new office spaces expected to come online by 2021, pre-committed space was 5,200 sqm lower compared to the second quarter of 2020.
“While Cebu has the available supply of both space and manpower, businesses may locate in other markets that may fit their requirements better. Given these factors, recovery may be slow in the market for the periods to come,” KMC said.
In a separate research note sent to the Philippine News Agency, Joey Bondoc, senior research manager at Colliers International Philippines, said the downward pressure on Cebu’s office rents is expected to continue up until 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,” he said.
Bondoc said once market sentiments improve this could contribute to a stronger pace of office leasing beyond 2021.
Colliers sees new office completions in 2021 for Metro Cebu rising by 206 percent to 114,100 sqm compared to its projected 37,300 sqm in 2020. These include office buildings that were deferred in 2020.
“Completion of some office buildings will likely be delayed to the second half of 2021 to 2022. From our initial projection of 100,300 sqm of annual new supply from 2021 to 2022, we now see the delivery of about 93,600 sqm annually,” Bondoc added. (PNA)
