MCIA Terminal 2, big-ticket projects fuel 2018 growth

YEAREND REPORT: Last of 2 parts

The completion of a big-ticket project, and the promise of more to come in Cebu for both public and private developers continues to fuel the growth engine of Cebu’s real estate and property sectors in 2018.

Sinulog dancers welcome arriving guests during the June 2018 inauguration of the P17.5 billion Mactan Cebu International Airport Terminal 2, a month before it officially opened in July 2018. / CDN FILE PHOTO

The opening last July of the P17.5-billion Terminal 2 of the Mactan Cebu International Airport (MCIA), which started as a Public-Private Partnership (PPP) project of the previous administration and was carried under the Duterte Administration’s Build, Build, Build program, has brought more optimism in Cebu’s property sector since the promise of more tourists can also translate to the promise of more infrastructure projects for the real estate and property sectors.

While the MCIA Terminal 2 has already been completed, another Build, Build, Build program big ticket project – the Metro Cebu Expressway that will link Danao City in the north to Naga City in the south – is already underway with the start of construction works for the project.

“For the Metro Cebu Expressway, civil works started this year. It started in the Naga City side already. We are pushing for a bigger budget on this,” said Efren Carreon, director of the National Economic and Development Authority in Central Visayas (NEDA-7).

The project was given an initial P300 million budget this year and the Regional Development Council (RDC-7) is pushing for more budget for the project in 2019.

The expressway project is expected to complement the P10-billion Cebu International Container Port (CICP) project in Consolacion which has yet to start construction after getting funding through official development assistance (ODA) from the South Korean Government.

The Cebu Port Authority (CPA) is still awaiting word from the Department of Transportation (DOTr) regarding its implementation.

The controversial Bus Rapid Transit (BRT) project and the Light Rail Transit (LRT) project, which are part of the DOTr’s Metro Cebu Integrated and Intermodal Transportation System (MCIITS), is expected to be in operation by 2020, at least for its first phase.

The 5.5-kilometer Cebu-Negros Link Bridge and the 24.5-km Cebu-Bohol Bridge have also yet to be implemented.

But the Cebu-Cordova Link Expressway (CCLEX) project, which is the third bridge connecting mainland Cebu to Mactan Island, had already started construction last July. The project is a public-private partnership with the Manny Pangilinan-led Metro Pacific Tollways Development Corp.

Business leaders and local officials see these infrastructure projects as vital to sustain Cebu and the region’s continued growth.

Officials are one in saying that the major concern for Metro Cebu is traffic congestion. And these projects should be able to address this problem in some way.

“We’re looking forward to the mass transport system. That’s the response to traffic congestion. But the expressway, container port, and third bridge, these will also help alleviate traffic once completed,” said Carreon who is also the vice chairperson of RDC-7.

Cebu Chamber of Commerce and Industry (CCCI) President Antonio Chiu has shown his support on the DOTr MCIITS, which he calls a “basket of solutions” to improve the traffic condition.

He added that he hopes that by 2019, these projects will start to take shape.

For his part, Mandaue Chamber of Commerce and Industry (MCCI) President Stanley Go said that he could see that while there were already problems, something was also being done to at least help address or mitigate these problems.

“It’s good for Cebu that we have a third bridge (CCLEX) being constructed. By 2021, it will be completed. It will help Cebu a lot. The BRT and LRT are also on implementation state. The second bridge is being improved. You can see there are investments pumped in by government and aligned to the Build, Build, Build Program,” he said.

Private properties
Alongside government efforts is the bullish stance of private developers, both local and national players, in pouring investments for projects in Cebu.
Property management and research firm Colliers International Philippines pointed out the need for public infrastructure and government support to help spur move developments in Cebu.

“We believe that opportunities in Cebu property market abound. Aside from efforts to improve Metro Cebu’s infrastructure backbone, the growing domestic economy has been providing a boost to both outsourcing and traditional /non-outsourcing businesses,” said Joey Bondoc, Colliers’ research manager.

As a response to this, he said that local and national developers had grabbed these opportunities by building more offices, residential condominiums, and hotels and serviced apartments in the province.

Bondoc said they had noted a good rate of absorption of office spaces in Cebu, led by business process outsourcing (BPO) companies.

But looking forward, he advised developers to upgrade their properties in order to attract more higher-value firms.

“Developers shouldn’t skimp on facilities of their projects – whether office or residential condominium – considering the discerning preferences of high-profile KPO (knowledge process outsourcing) tenants,” he said.

Colliers’ forecasts that in the coming year, there will still be less than 10 percent office space vacancy in Metro Cebu.

Knowing the problems
The year 2018 was also a year when developers faced some challenges regarding their projects.

According to Anthony Leuterio of Leuterio Realty and Brokerage, one the biggest problems of developers in the past year was securing a license to sell (LTS) from the Housing and Land Use Regulatory Board (HLURB).

“Ninety percent of all developers had a problem with that. That’s why starting last March 2018, some projects were stalled since no permits came out, or only very few. Most of those that came out were applied for in 2017,” he said.

Because of this, he said some developers had decided to delay the launch of some of their projects.

One of the reasons on the delay is the additional requirements in securing the LTS including having to develop a socialized housing component which became hard for developers to look for raw lots.

Leuterio said developers were forced to develop housing components in far-flung areas like Balamban, Naga City, and Bogo City among others.

“2018 was a very big kickoff for developers to know the requirements are so tough. And they know now how to position themselves for 2019,” he explained.

More Chinese coming
For the coming year, Leuterio said they would be expecting more and more Chinese nationals buying properties in Cebu.

He warned though that developers should not allow so much Chinese buyers for their units saying they were “temporary” in nature and would buy “in speculation.”

Allowing more Chinese buyers will also drive up demand for these units, and consequently make prices more expensive. This phenomenon could shut out the growing number of Cebuanos and Filipinos who would want to buy properties for themselves.

Colliers International Philippines also see more Chinese investors and end users in Cebu.

With more direct flights to Cebu from several cities in mainland China, more Chinese companies are also investing in the province.

For one, Bondoc said Mactan Island was becoming a preferred location of Chinese offshore gaming firms.

These firms also need a residential component in order to house their employees near their workplaces.

Leisure attractions
But aside from residential properties, Colliers is also advising developers to look into integrated leisure attractions to get a slice of Cebu’s growing tourism and leisure market.

“Colliers encourages local and national hotel operators in Metro Cebu to modernize facilities and renovate while highlighting their hotels’ historical and cultural characteristics,” Bondoc said.

“Enhanced experiential value plays a major role in ensuring historic hotels’ success. Hence, developers should leverage not only Cebu’s rich history, but also the hotels where available,” he added.

Based on their forecast, Colliers sees the hotel occupancy in Cebu to be between 65 to 70 percent in 2019.

Not a lot of new hotels are expected to be completed in 2019 but Bondoc said that by 2020 and 2021, more will be coming up.