Metro Cebu office space market draws interest from Manila occupiers
CEBU CITY, Philippines — Interests for office spaces in Metro Cebu have notably increased in the third quarter of 2020, despite the challenges faced by the real property sector amid the pandemic.
This development was noted by top professional services firm Jones Lang LaSalle (JLL) in its market overview for the period.
According to JLL Philippines, Metro Cebu’s shares of the total office space inquiries in the third quarter climbed to 28.6 percent from previously at only 4 percent. These inquiries come from occupiers from Metro Manila and some local-based businesses.
Those interested in the Metro Cebu office space market are mainly from firms engaged in offshoring and outsourcing (O&O) at 95.2 percent while the remaining 4.8 percent are inquiries from traditional office occupiers.
“We have observed a lag in terms of the impact of the pandemic on the office sector overall, and this is seen in the relative resiliency of office rentals in the previous quarters despite the overall slowdown in the market,” said JLL Philippines Head for Research and Consultancy Janlo de los Reyes as he explained the overall resiliency of the office market.
De los Reyes added that might be an L-shaped recovery for Metro Cebu’s office sector “that would gradually take shape in 2021, depending on the developments in the next quarter.”
“More organizations are starting to settle in the next normal and are strengthening their financial and operational positions. The sooner organizations have adjusted to the next normal, the sooner the recovery is for the office sector,” de los Reyes said said.
Pandemic impact in office market
The positive outlook for Cebu’s office space market is despite the challenges faced by the sector as exhibited in the slippage of average rents and the hike in the vacancy of spaces.
According to the JLL market overview, the average vacancy rate in the office spaces in metro Cebu jumped by 18.6 percent in the third quarter.
De los Reyes attributed the noted rise of office vacancy to pre-termination of contracts by Philippine Offshore Gaming Operators particularly in the areas of Lapu-Lapu City and Mandaue City. The office space vacancies in these areas increased in the third quarter by 47% and 26.7%, respectively.
“Average rents likewise slipped by around 1.3% in Q3 due to the continued softening demand, with Mandaue City logging the biggest slip at -2.4%,” JLL said in a news release.
“In terms of demand, O&O firms which dominate Metro Cebu’s leasing market transactions sharply declined in Q3,” the firm added.
“We anticipate the emergence of the ‘hub-and-club model’ wherein occupiers will maintain a head office (club) where socializations such as client meetings and town halls will be held. They will also expand through satellite offices (hubs), which may be closer to where their employees reside,” said de los Reyes.
De los Reyes said this trend in the behavior of the market is “taking shape now and may redefine the real estate strategy of occupiers moving forward.”
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