Office market in Cebu becoming more stable

Metro Cebu's office space sector bounced back on rising demand from information technology-business process management firms, according to a property research firm.

In a statement, JLL Philippines Head of Research and Strategic Consulting Janlo C. de los Reyes said Cebu's office market is stable, although there remains a mix of stability and lackluster performance across indicators.

Data from JLL show that office leasing volumes in Metro Cebu reached 23,825 square meters (sq.m.) in the second quarter of 2022.   

“Information technology and business process management (IT-BPM) firms continue to drive leasing activity, accounting to 67.3% as of the first half of 2022, while non-IT-BPM industries such as publishing, finance and banking, maritime technology, and engineering and architecture account for a cumulative 32.7 percent,” JLL Philippines said.   

IT-business process outsourcing (BPO) companies accounted for 4,600 sq.m. of move-ins in Cebu IT Park, and 4,300 sq.m. of move-ins in Cebu Business Park.

The office pull-outs declined by 79.25% in the first half of 2022 from the second half of 2021.   

“Pull-outs have slowed down to around 9,872 sq.m., where we saw around 2,300 sq.m. BPO pull-out and 800 sq.m. corporate pull-out,” De los Reyes said.

The vacancy rate also declined to 21.9%, from a peak of 23.7% in the fourth quarter of 2021.

“We saw the improvement from Cebu IT Park while Cebu Business Park registered an uptick,” he said.

Mr. De los Reyes noted “weak precommitment” levels in Metro Cebu, with most of upcoming office stock still vacant.

Office rentals will likely remain soft “owing to supply pressure from the sizeable volume of unoccupied future stock", he said.

Office rental rates were unchanged at P632 per sq.m. per month.

JLL Philippines said the logistics market in the country would likely see “exponential growth,” hitting 3.06 million sq.m. by 2025 and 4.80 million sq.m. by 2030 for Grade A and B logistics facilities.

“The logistics market in the Philippines is still in the early stages of growth, and there’s positive sentiment in a growing market,” Charlie McNaught, JLL Philippines director for logistics and industrial, said.

Demand is driven by the “seismic shift” in consumer spending, as many have shifted to e-commerce platforms during the pandemic.

“There is an opportunity to introduce Grade A logistics to meet the demands of occupiers, as a lot of them improve their supply chain models and become more conscious of their ESG (Environmental, Social, and Governance) commitments,” McNaught said.