Cebu office leasing rate remains upbeat

CEBU, Philippines - Cebu continued to perform well in the office leasing rate, as reported by an international consulting and property management firm, CBRE Richard Ellis.

Vacancy rates have been on a steady decline as manifested in the result in the second half of 2011, brought about by the expansion of the offshoring and outsourcing industry in Metro Cebu.

According to the report, the steady decline for office space in Cebu, is largely attributed to the increasing office space requirements of BPO (Business Process Outsourcing) companies which are expanding their operations within Metro Cebu.

Increasing occupancies particularly in the demand continued to drive the rental growth particularly in BPO buildings, the report stated.

Office buildings in Cebu Business Park (CBP) registered an overall vacancy level of 14.55 percent during the second half of 2011, from 20.25 percent in the last first half of the year.

The decline of vacancy rates also can be attributed to the fast take-up of the newly completed office building within the CBP.

Todal occupied space in the CBP alone, grew by 56.18 percent year-on-year which is primarily due to the fast absorption of BPO office space.

Average asking rates inched up by 14 percent, from P448.32 per-square-meter (psm), a month to P454.92.

Additional supply remained limited in the CBP with only approximately 6,536 square meters of leasable office space expected to be completed in the next 12 months upon the completion of Apple One building.

Strong demand for BPO space in Cebu IT Park on the other hand, contributed to the continuous improvement in occupancy levels within the area, the report said.

Occupied space increased by 16.20 percent while vacancy rates declined further to 1.37 percent from 3.85 percent.

The newly completed buildings including eBloc2 and Skyrise 4 added a total of 32,645 square meters of BPO space in at the cyberpark.

Rental rates in the area also increased by 3.63 percent from P462.32 per-square-meter, per month, in the first quarter last year, to P479.10 in the second half of 2011.

The report added that upcoming BPO office supply registered high pre-committed levels as BPO firms continue to expand their operations within the Cebu IT Park. This in turn, encouraged developers to invest on new office developments to support the growing demand from BPO companies.

Approximately about 49,400 square meters of BPO space is expected to be completed in the next two years.

The expansion of the BPO industry in Metro Cebu also benefited office buildings in the fringe areas as over-all vacancy further declined to 22.90 percent in the second half of 2011 from 26.17 percent in the previous semester last year.

Average asking rate continue to climb up during the period increasing by 8.97 percent from P376.27 psm/mo to P407.78 psm/mo.

According to the report the continuous growth of the Cebu office market prompted the rise of investments on new office developments in non-traditional locations.

Mactan Newton is expected to start operation within this quarter and will add approximately 5,740 square meters of BPO office space.—(FREEMAN)