Office rent growth to ease as new supply comes in
This shows the existing and upcoming business districts that have influenced Cebu’s real estate market. (Source: KMC Research & Consultancy)
Office rental rates in Metro Cebu will continue to grow, but at a more conservative pace, as new office spaces are completed, real estate firm KMC MAG Group, Inc. said.
Growth in take-up will continue to be driven mainly by the information technology-business process outsourcing (IT-BPO) sector, which continues to find Cebu an attractive site, said KMC MAG chairman Gregory Kittelson.
“Real estate, in general, will continue to grow and IT-BPO will continue to take up about 95 percent of office space,” he said in a press conference shortly before their first anniversary celebration in Cebu on Friday.
Another growth driver is the hotel and leisure sector, in view of the projected increase in visitor arrivals upon the completion of the Mactan Cebu International Airport (MCIA) upgrading project, said managing director Michael McCullough.
But he said the completion of new townships with office components will put pressure on rental growth and vacancy rates.
Rental rates in Cebu have been growing significantly in the last few years, he said. Monthly rents for Grade A office spaces went up 8.1 percent last quarter, with the highest recorded at P528.3 per square meter.
McCullough said office rents in Cebu were generally still lower than those in Metro Manila last quarter, although some landowners have raised rents to almost the same level as those in the capital.
The highest rents were still in the Makati Central District, followed by those in Bonifacio Global City, Quezon City, Bay Area, Ortigas and Alabang.
Historically, McCullough said rental take-up in Cebu averages 40,000 to 50,000 square meters per year. As of last year, Grade A office stock in Cebu neared the 700,000-square-meter level.
The entry of new office spaces is expected to further push up Cebu’s vacancy rate, which has already increased to 12.8 percent in the first quarter of this year from 12.5 percent in the last quarter of 2015.
“Twelve percent is okay. But we’d like to keep it single digit, or rental rates would really go down which would be a disadvantage to developers,” said associate director Anna Maria Marco.
New supply will come from, among others, the Pacific World Tower at the Mactan Newtown in Lapu-Lapu City, Philam Life Cebu and BPI Cebu Corporate Center at the Cebu Business Park, and Avenir along Archbishop Reyes Ave. in Cebu City.
KMC MAG has no serviced offices outside Metro Manila. But the Cebu office subleases space mostly to BPOs that need temporary offices while waiting for their buildings to be completed.
Of the 250 seats available in Cebu, only nine are vacant. Tenants are East West Enterprises, Geidi, Global Aztec BPO, Indinero, Asia Inspection, Lanex, Sawblade, Opsify and Interfone.
Among the services that KMC MAG provides are tenant representation, project marketing and landlord representation, research and consultancy, offshoring corporate services, asset management, residential services, serviced offices, hotels and leisure.
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