Office vacancies down 8.1% in Q3

CEBU, Philippines - The performance of Cebu's office market continues to improve after vacancies dropped to 8.1 percent in the third quarter of 2016 compared to 11.7 percent in the second quarter, according to real estate services firm.

In its Cebu office market update for third quarter, KMC MAG Group noted that the decline in vacancies has been due to the positive net absorption of 24,800 square meters although no new supply additions were recorded during the quarter.

"Most of the demand has been concentrated in the established Cebu IT Park and Cebu Business Park with average vacancy rates dropping in both districts to 0.85 and 6.8 percent, respectively," said KMC, a local affiliate of London's property consultant Savills.

Overall, KMC said that rentals in Cebu posted healthy growth of 6.3 percent year-on-year in the third quarter although at a decelerating pace against the 7.2 percent growth in the second quarter.

"Despite the lower vacancies, rentals in Cebu Business Park declined marginally by -0.6 percent QoQ (quarter-on-quarter)," the real estate agency said.

Looking forward, KMC expects the Cebu Business Park to end the year with vacancies returning to double digits with the expected completion of the 24,000-square meter Philam Life Cebu building in the fourth quarter this year.

"This should further add downward pressure on rents if availabilities are not taken up quickly," KMC also noted.

Rate and stock

Currently, Cebu's average net office rental rate stands at P534.6 per square meter while upper rental rate is at P700 per square meter.

Cebu's current office stock, including those in Cebu Business Park, IT Park and other fringe areas, stands at 697,936 square meters.

Developments on the pipeline are expected to add 389,473 square meters of office space between this year and 2019.

Cebu is one of the Philippines' growing central business districts (CBDs) and is host to various BPO companies with its low rental rates, consistently growing economy and large pool of talent.

Cebu City now ranks 7th in the latest 2016 Tholons' Top 100 Outsourcing Destinations report, a point higher from last year's Top 8.

Cebu's real estate sector is benefiting from the investors' positive sentiment, as local players implement their massive capital expenditure plans to cover new launches and ongoing developments in the city.

In an earlier interview with Cebu Holdings Inc. President Aniceto Bisnar Jr., he expressed his continued confidence on the Cebu market. CHI is an Ayala-led company.

"We hope to continue the build-up (here)," the official said.

"We continue to reinvest in Cebu. We are confident Cebu will still be attractive to foreign direct investments even the IT-BPO sector," Bisnar noted. (FREEMAN)