Metro Cebu office take-up remains strong in Q1

CEBU, Philippines — Metro Cebu remains the most attractive expansion hub for outsourcing firms in the Philippines, as it leads other provincial sites in terms of office space take-up in the first quarter of 2023.

According to the latest report released by Colliers Philippines, while vacancies remain elevated due to new supply coming online, expanding outsourcing firms are likely to occupy more office spaces.

“We see a tenant-leaning market for Cebu and this should provide an opportunity for shared services and multinational companies (MNCs) to take advantage of the province’s labor pool and infrastructure. Existing occupiers in the country may also want to look into Cebu for their business continuity plans,” the report indicated.

On the other hand, property landlords are encouraged to remain proactive in chasing major occupants that are on the lookout for expansive and new office spaces as well as sustainable buildings.

“Firms that are expanding and are looking at occupying more expansive office spaces should use this time as an opportunity to negotiate for favorable rates. Colliers believes that just like in Metro Manila, there’s a greater opportunity for Cebu-based firms (including BPOs) to implement flight-to-value strategies, i.e., occupy new and quality office space at attractive rates given the availability of quality office spaces in the province,” the report said.

Existing occupiers, especially shared service providers and MNCs with headquarters in Metro Manila, may also want to revisit and consider Cebu in their business continuity plans (BCPs) due to its mature infrastructure and skilled labor pool.

Seizing opportunities amid a testy market

According to the report, the office market remains testy at this point. “We see this within and outside Metro Manila. While some companies continue to look for options outside of the capital region, we also see some firms implementing wait-and-see and holding off expansion plans.”

While vacancies remain elevated, Colliers believes that there are opportunities that both landlords and occupants can maximize. Landlords and tenants should remain aggressive in coordinating with local ICT councils, local government units, and academic institutions to address skills mismatch in Cebu and ensure that the city’s graduates are ready for higher-value outsourcing services, especially amid the rise of artificial intelligence.

While Cebu is already popular for the more sophisticated outsourcing jobs, other cities such as Iloilo, Bacolod, Davao, and even Clark are catching up.

“Metro Cebu must sustain its attractiveness as an outsourcing hub and landlords, local government units, and local ICT councils have crucial roles to play. The challenge for Cebu is to remain on the investment radar of foreign IT-BPM investors,” the report stressed.

In the first quarter of 2023, Colliers recorded the delivery of 41,400 sq meters (445,400 sq feet) of new office space with the completion of Skyrise 3B and Faustina Center in Cebu IT Park (CITP) and Cebu Business Park (CBP) Fringe, respectively.

In 2023, it projects the completion of 78,500 sq meters (844,700 sq feet) of new office space, lower than the 89,800 sq meters (966,200 sq feet) completed a year ago. Among the buildings due to be completed for the remainder of 2023 include Il Corso in South Road Properties (SRP), Johndorf Tower in CBP, and MAHI in Mactan.

From 2023 to 2025, Colliers expects the annual delivery of about 91,300 sq meters (982,400 sq feet) with CBP and CITP accounting for a combined 51% of the new supply during the period. This is higher than the 88,200 sq meters (949,000 sq feet) of new office space completed annually from 2020 to 2022.

As of the first quarter of 2023, office transactions outside Metro Manila reached 29,200 sq meters (314,200 sq feet), down 37 percent from the 46,300 sq meters (498,200 sq feet) recorded a year ago. Meanwhile, deals in Cebu reached 16,100 sq meters (173,200 sq feet), or 55 percent of total provincial transactions.

Outsourcing firms continue to dominate transactions, accounting for 60 percent of total deals in Metro Cebu. Among the notable transactions include spaces taken up by Dexcom, BPO Seats, and Cloudstaff. These firms occupied spaces in Cebu Business Park (CBP).

As of the end of the first quarter of 2023, vacancy in Metro Cebu reached 23.2 percent, higher than the 21.7 percent posted a quarter ago due to the completion of new office space during the period. — (FREEMAN)