The Cebu property market has been affected by pandemic-induced disruptions to the country’s economy.
Office leasing here, for instance, remains challenging while the launches and take up of residential units were down as of the first nine months of 2020. However, we see some positive developments including the government’s anti- COVID-19 efforts, and we are optimistic that these are likely to support the growth of the region’s property market moving forward. This year, we are already seeing shifts in market preferences and these are likely to redefine the Cebu property market post-pandemic.
Cebu’s real estate market was the main focus of Colliers Philippines’ property webinar on Thursday. I was joined by my colleague, Colliers Philippines director for office services Dom Andaya; Innoland Development Corp. COO Charles Ong; and former CIB.O managing director Wilfredo Saa Jr. We discussed trends in the Cebu property market as well as recovery enablers.
Office leasing remains testy
As of the end 2020, Colliers recorded a net take-up of –55,700 sqm. This resulted in a vacancy of 19.9 percent, the highest in Cebu since we started tracking data in 2007. In 2021, we see Metro Cebu office vacancy rising further as more office spaces are being vacated by outsourcing firms and providers of English as a Second Language (ESL) services that have been closing or downsizing office space requirements. Despite this, Colliers sees a faster pace of recovery in major hubs such as Cebu IT and Business Parks once market sentiment improves.
Delayed completions
Based on the results of the Tholons Services Globalization Index 2020, Cebu is the 15th most competitive outsourcing destination in the world. Cebu is one of only two Philippine cities, along with Metro Manila, that made it to Top 100. This should sustain Metro Cebu’s competitiveness and viability as outsourcing firms continue to scout for locations outside Metro Manila. This should also help the region attract more outsourcing locators once market sentiments improve and contribute to a stronger pace of office leasing beyond 2021.
Residential investment opportunities
Cebu is recognized as the premier investment hub outside of Metro Manila and has undergone significant transformation over the past few years.
Cebu’s residential sector enjoys a discount compared to projects located within the country’s capital. The proliferation of both local and national developers in Cebu has raised land and property values. This was complemented by the rising demand for integrated communities, resort-oriented developments, and projects on the higher end of the price segments.
In 2019, launches and take-up in the province reached a record-high 12,400 units and 10,600 units, respectively. Given the impact of the pandemic on investor appetite for residential units, launches and take-up in the first nine months of 2020 reached only 2,000 units and 4,100 units, down 80 percent and 54 percent year on year, respectively. Colliers projects a slow rebound in residential demand in the latter half of 2021. However, this will still hinge on the overall growth of the country’s economy, expansion of businesses, and success of the government’s anti-COVID programs.
The demand for mid-income condominium units has been driving launches and take-up in Metro Cebu. In first nine months, the mid-income segment accounted for 51 percent of take-up during the period. This indicated the rising purchasing power of Cebuano investors and end-users over the past few years. We expect projects under the segment to partially fuel the recovery of demand by end-2021 to 2022.
We recommend that developers continue serving the requirements of Cebu’s end-user market. Aside from condominiums, we believe that house and lot (H&L) projects remain attractive among overseas Filipino workers (OFWs). Anecdotally, OFWs are one of the major drivers of Cebu’s horizontal residential market as they are also the end-users. In our view, developers should highlight their sanitation and emergency preparedness protocols as the pandemic raised the need to live within a building that employs strict property management procedures.
Indeed, we are facing challenging times but uncertainties in the market have been compelling both developers and investors to pivot. So expect more recalibrations in the Philippine property landscape.