Research & Forecast Report Cebu 1H 2014
Accelerating success.
Regional growth sustains real estate activities in Cebu Office
Retail
Office stock increased by 12,000 sq m during 1H 2014 with the completion of Skyrise Alpha in Cebu Business Park. In the next two years, close to 200,000 sq m are expected to be delivered in key locations. Demand was driven by the Business Process Outsourcing (BPO) industry as companies pursue expansion activities, with 3,000 sq m of office space taken up during the period. Meanwhile, overall vacancy in Metro Cebu increased to 5.2%, 240 basis points higher than the previous period.
With a strong regional economy backed by consumer spending, retail developers are delivering close to 400,000 sq m of retail space by 2016 to seize opportunities in the market. Apart from national developers, new players are entering the market with three new retail projects slated for delivery in the next two years. Meanwhile, retail vacancy reached high 98% levels as more retailers expanded their presence in Metro Cebu.
Residential
Market Indicators
Project launches decreased by 25% YoY, as residential developers have assumed a wait-and-see approach. Despite the slowdown in launches, net take up remained relatively flat as 2,900 units were sold during the period. By 2017, residential inventory in Metro Cebu will reach 30,300 units, 75% of which will be located in Cebu City.
OFFICE RESIDENTIAL RETAIL
Office supply grows as BPO sustains regional economy The office sector is riding on the momentum of an expanding regional economy. In FY 2013, the Gross Regional Domestic Product (GRDP) of Central Visayas grew by 7.4%, higher than the national average of 7.2%. The growth is attributed to the 6.9% increase in the services sector, which comprised 57.6% of the regional economy. As a response to positive growth in the economy, developers are expected to deliver close to 115,000 sq m of office space by the end of the year, mostly catering to Business Process Outsourcing (BPO) companies. The BPO industry is seen to sustain the upward trajectory in the services sector as BPO companies are currently undergoing expansion activities. Net take-up during 1H 2014 was recorded at 3,000 sq m, signifying an increasing demand for office space despite the introduction of Skyrise Alpha (12,150 sq m) in Cebu Business Park. Xerox, a BPO company providing IT services, recently completed its lease acquisition in Skyrise Alpha, apart from its current operations in Cebu IT Park. In addition, another BPO company is expected to close a leasing deal in Cebu Business Park as the company has experienced growth in their business. Overall vacancy in Metro Cebu increased by 240 basis points to 5.2% in 1H 2014, from the previous half’s revised vacancy rate of 2.8%. Cebu IT Park enjoyed low vacancies at 1.3% during the period, while vacancy rates in Cebu Business Park swelled to 4.8%. On the other hand, the Uptown Area and its environs experienced an increase in vacancy at 14.4%, as stand-alone buildings experienced difficulties in leasing their office spaces. Feedback from BPO companies highlighted their preference to
set up and expand their operations in mixed-use developments because of the support services, security, and mobility mixeduse developments provide to the employees. It is because of this that Mactan Newtown, an emerging development in LapuLapu City, enjoyed full occupancy during the period. Colliers predicts vacancy in Metro Cebu to increase by 2 to 3% due to the expected delivery of nine office buildings by year-end, including E Bloc 3 (14,800 sq m) in Cebu IT Park, Cebu IT Tower 2 (10,200 sq m) in Cebu Business Park and Norkis One (8,000 sq m) in Mandaue. Average rental rates in Cebu Business Park increased by 4.0% HoH to a monthly rate of PHP 502 per sq m, due to the strong demand in the area. Meanwhile, rental rates in Cebu IT Park increased modestly, registering a 0.6% HoH growth to a monthly rate of PHP 505 per sq m. In the Uptown / Osmena Area and its environs, monthly rental rates ranged between PHP 300 to PHP 550 per sq m.
Cebu Office Stock (1H 2014) LOCATION
USEABLE STOCK (NUA SQ M)
Cebu Business Park
167,657
Cebu I.T. Park
211,411
Others
218,432
Total
597,500
a
Includes office developments in Mandaue, Mactan, and Cebu City and excludes those in Cebu Park District Source: Colliers International Philippines Research a
Cebu Average Office Vacancy (1H 2014) LOCATION
VACANCY (%)
Cebu Business Park
4.77
Cebu I.T. Park
1.30
Uptown / Osmeña Blvd. Area
14.43
Overall
5.17
Source: Colliers International Philippines Research
Cebu Office Lease Rates (1H 2014) LOCATION
LEASE RATES (PHP / SQ M / MONTH)
Cebu Business Park
420 – 750
Asia Town IT Park
500 – 700
Uptown / Osmeña Blvd. Area
300 – 550
Source: Colliers International Philippines Research
Cebu Future Office Supply (NUA Sq M) LOCATION
FY2013
2014
2015
2016
TOTAL
Cebu Business Park
155,508
53,379
44,621
68,787
322,295
Cebu I.T. Park
211,411
14,784
23,218
-
249,413
Others
218,432
46,142
49,171
11,700
325,715
Total
585,351
114,305
117,010
80,487
897,153
a
Source: Colliers International Philippines Research
2
a
Includes office developments in Mandaue, Mactan, and Cebu City and excludes those in Cebu Park District
Research & Forecast Report | 2Q 2014 | Cebu | Colliers International
Residential demand remains resilient despite decline in new launches Residential condominium developers have assumed a waitand-see approach as new launches decreased by 25% YoY during 1H 2014, from 3,200 to 2,400 units. Developers are holding back from launching new projects as they wait for their inventory to be absorbed by the market. Among the projects that were launched during the period are Solinea Lazuli Tower (605 units) by Alveo Land, Avida Towers Riala Tower 3 (666 units) by Avida Land, and The Midpoint Residences (335 units) by Pacific Land Ventures & Property Dev’t, Inc. On the other hand, take-up remained strong during 1H 2014 as close to 2,900 units were sold, 100 units shy of take-up figures recorded in 1H 2013. This scenario was a first for the preselling market in Metro Cebu, where take-up exceeded new launches. This can be attributed to continued strong demand for affordable end-user housing, as Colliers noticed a fast take-up for projects in the low cost segment. At the same time, more local developers are marketing their products as a viable investment option, thereby opening the market to local and foreign investors.
Approximately 19,700 units will be delivered in Metro Cebu by 2017, the highest of which will be in 2015 at 7,300 units. Cebu City remains the preferred location for residential condominiums, as an average of 3,900 units will be completed annually from 2014 to 2017. Meanwhile, Lapu-Lapu houses a majority of the leisure condominiums projects in Metro Cebu, which will stand at 2,900 units by 2016. Among the projects that will contribute to the supply stock by 2H 2014 are One Pavillion Place North (299 units) and South (251 units) Towers by Gold Peach Properties, Grand Residences East Tower 1 (247 units) by Grand Land, and Calyx Residences (238 units) by Innoland Development Corporation.
Cebu Residential Condominiums Cumulative Supply Stock (1H 2014) LOCATION
NUMBER OF UNITS
Cebu City
9,209
Lapu-Lapu City
1,970
Mandaue City
1,357
Source: Colliers International Philippines Research
Cebu Residential Condominiums Future Supply Stock LOCATION
FY 2013*
2014
2015
2016
2017
TOTAL
3,071
6,361
3,215
2,939
23,243
390
831
1,543
252
4,986
682
144
288
-
2,067
7,336
5,046
3,191
30,296
Cebu City
7,657
Lapu-Lapu City
1,970
Mandaue City
953 10,580
4,143
TOTAL
Source: Colliers International Philippines Research
3
Research & Forecast Report | 2Q 2014 | Cebu | Colliers International
* Cumulative as of period indicated, revised
Strong consumer spending induces retail supply growth Consumer spending has always been a key component of Central Visayas’ regional economy. In fact, it comprised 70% of the economy for the last three years. In addition, regional household spending expanded by 7.0% in FY 2013, signifying a growing consumer base amid increasing incomes. Based on the data from the Family Income and Expenditure Survey of the National Statistics Office (NSO), average income in Central Visayas increased by 6.4% annually since 2006 with its effects likely to spill over in the provincial level. With the typical Cebuano gaining greater purchasing power, retail developers are bullish as close to 400,000 sq m of retail space is expected to be delivered over the next two years.
Cebu Average Retail Vacancy (%) LOCATION
Metro Cebu
2H2013*
1H2014
2.46%
1.35%
Source: Colliers International Philippines Research
* revised and rebased
Apart from established developers, new players are participating in the retail market. In 1H 2014, three new retail projects are announced which is expected to bring in 25,000 sq m of retail space. CityMall Commercial Centers, Inc. formalized their entry in the Cebu retail market with the launch of CityMall Consolacion and CityMall Bacalso in Cebu City. Also announcing their entry is Axis Uptown Clusters, Inc., with the groundbreaking of their first project, Axis Entertainment Avenue, located in the former Cebu Capital Commercial Complex. The project serves as a retail component for their mixed-used development named Vibo Place. Despite the completion of Ayala Center Extension in December 2013, overall retail vacancy in Metro Cebu declined by 1.1% HoH to 1.4% in 1H 2014 as other malls experienced a significant decrease in vacancy. Park Mall and J Centre Mall, both located in Mandaue, posted a double-digit decline in vacancy as more retailers decided to expand their presence in Cebu and take advantage of the available spaces in the malls. With only 9,000 sq m of retail space expected to be delivered this year, Colliers expects retail vacancy to remain flat into the end of the year.
Metro Cebu Retail Stock Future Supply Stock (GLA Sq M) LOCATION
Metro Cebu
FY 2013*
2014
703,067
9,000
Source: Colliers International Philippines Research
4
Research & Forecast Report | 2Q 2014 | Cebu | Colliers International
2015
2016
312,100
90,829
TOTAL
1,114,996
* Cumulative as of period indicated, revised and rebased figures
485 offices in 63 countries on 6 continents United States: 146 Canada: 44 Latin America: 25 Asia Pacific: 186 EMEA: 84
Primary Author: Romeo Arahan Research Analyst | Philippines +63 2 888 9988 romeo.arahan@colliers.com Contributors: Julius Guevara | Director David A. Young | Managing Director
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