cebu real estate market update

2012 | ANNUAL UPDATE
RESEARCH & FORECAST REPORT
CEBU REAL ESTATE
MARKET UPDATE
Executive Summary
OFFICE
With the increasing entries of BPO firms in Cebu, both local and major developers have ramped
up their project portfolios, delivering over 80,000 sq m of new office space in 2012 with roughly
150,000 sq m more due for completion from 2013 to 2014. Despite the substantial supply last
year, the vacancy rate in the metropolitan district dropped to 2.8% from its standing at 5.5% in
2011.
RESIDENTIAL
Across Cebu, Mandaue and Lapu-Lapu cities, close to 7,000 condominium units were launched
last year, a 35% year-on-year growth. The increase in units launched was mainly driven by
projects from both local and major developers. As launches improved, the number of take-ups
likewise registered a 25% year-on-year growth to over 4,700 units.
The province of Cebu is a long narrow island
that lies to the east of Negros Island, west of
Leyte and the southeast of Bohol. It stretches
225 kilometers and is surrounded by 167
neighboring smaller islands that includes
Mactan Island, Bantayan, Malapascua, Olango
and the Camotes Islands.
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RETAIL
Cebu City, where commercial and business activities are primarily centralized, hosts more than
half the total number of malls on the island. At present, there are about 16 malls in the city,
translating to over 600,000 sq m of gross leasable space. Last year, mall developers in Cebu City
benefited from the vibrant spending activities and high foot-traffic across districts, leading to an
average mall occupancy rate of 98.7%.
CEBU | 2012 | THE KNOWLEDGE
CEBU OFFICE STOCK (END-2012)
LOCATION
USEABLE STOCK (SQ M)
CEBU BUSINESS PARK
142,418
CEBU IT PARK
196,495
OTHERSa
208,716
TOTAL
547,629
Includes office developments in Mandaue, Mactan, and Cebu City and excludes
those in Cebu Park District
a
CEBU AVERAGE OFFICE VACANCY (2012)
LOCATION
VACANCY
CEBU BUSINESS PARK
3.13%
CEBU IT PARK
1.44%
UPTOWN/OSMEÑA BLVD.
AREAS
5.87%
OVERALL
2.83%
CEBU OFFICE LEASE RATES (2012)
LOCATION
VACANCY
CEBU BUSINESS PARK
P410-P700
CEBU IT PARK
P500-P700
DOWNTOWN
P300-P500
OFFICE
Investors and major developers have shown continuing interest in Cebu’s property market, leading to rapid developmental expansion, particularly
in the office segment. Originally one of the established First Wave Cities (BPAP), Cebu has further attracted offshore and outsourcing firms to
its pioneering business hub, the Cebu Park District, consisting of Cebu I.T. Park and Cebu Business Park. Based on the recent survey from
Tholons Inc.’s ‘Top 100 Outsourcing Destinations 2013’, Cebu has continuously strengthened its position as a competitive business location for
IT-BPO companies, rising through the ranks to secure the number-eight position this year.
At present, Cebu has over 60,000 engaged employees in the IT-BPO industry, which is estimated to represent over 250,000 to 300,000 sq m
of Metro Cebu’s office stock. Accenture, ACS, Convergys, Lexmark Research & Development Corp., JP Morgan, Fluor Daniels, Aegis People
Support, Teletech and Sykes Marketing are some of the firms that have established a footprint in the region.
With the increasing entries of BPO firms in Cebu, both local and major developers have ramped up their project portfolios, delivering over 80,000
sq m of new office space in 2012 with roughly 150,000 sq m more due for completion from 2013 to 2014. Some of these new offices delivered
last year are Aegis People Support Phase 2 (10,100 sq m), Skyrise 4 (16,500 sqm), One World Center (6,500 sq m), Calyx Center (5,100 sq m)
J Centre (9,200 sq m) GAGFA IT Center (20,300sq m) Apple One (7,400sq m) Creativo 2 (5,600sq m). For 2013, over 40,000 sq m of new
office space is expected, consisting of 2 Quad (13,000 sq m) in Cebu Business Park, The Link (13,300 sq m) and Ebloc 3 (14,900 sq m) both in
Cebu I.T. Park.
Despite the substantial supply in 2012, the vacancy rate in the metropolitan district dropped to 2.8% from its standing at 5.5% in 2011. The
decline is mainly attributed to the strong demand for centralized locations such as the Cebu Park District. A significant 5.0% decrease in
vacancy was seen in Cebu I.T. Park, lowering the rate to 1.5%. In Cebu Park District, vacancy also declined by 3.2% year-on-year. In contrast,
the vacancy rate in the Uptown / Osmeña Blvd Area increased by 2.3% year-on-year, to 5.87% from 3.23%. Meanwhile, rental rates grew 11%
YoY in Cebu Business Park with an average rental rate of P450 per sq m per month in end-2012. In Cebu IT Park and Uptown/Osmeña Blvd
Area, rents have been generally the same year-on-year ranging from P500 to P700 and P300 to P500 per sq m monthly, respectively.
P. 2
| COLLIERS INTERNATIONAL
CEBU | 2012 | THE KNOWLEDGE
RESIDENTIAL
The pre-selling residential condominium market in Cebu performed
strongly in 2012, as the number of launches and take-ups further
improved. Across Cebu, Mandaue and Lapu-Lapu cities, close to 7,000
condominium units were launched last year, a 35% year-on-year
growth. The increase in units launched was mainly driven by projects
from both local and major developers. Among these were Taft
Property’s Horizon 101 Tower 2 (649 units), Aboitiz Land’s The
Persimmon Studios (632 units), Megaworld’s One Pacific Residences
Towers A,B and C (573 units), and Ayala Land’s Avida Towers Riala
Tower 1 (621 units).
As launches improved last year, the number of take-ups likewise
registered a 25% year-on-year growth to over 4,700 units. The Cebu
market is similar to that of Metro Manila, and buyers are also generally
drawn to the broader category of smaller-sized units, particularly the
studio and one-bedroom types, with sizes ranging from 14 to 58 sq m.
These unit types have continuously been a preferable investment for
young professionals, students and shorter-term renters from the
nearby regions. The demand for studio and one-bedroom units is
estimated to have been about 60 to 70% of the total number of units
launched last year. Overall, the growth in take-up is attributed to a
healthy macroeconomic environment coupled with low interest rates
and affordable payment schemes.
Developers have long been confident regarding the residential
condominium market in Cebu. This is highly evident with new
developments in recent years. The supply of completed residential
condominiums grew rapidly by a 60% (CAGR) since the first project in
2005. At present, the total residential stock in all of Cebu, Mandaue
and Lapu-lapu cities is at 6,765 units. Developers remained poised
with the market, as new supply is expected to improve at an annual
average of 4,000 new units, at least over the next three years. While
major players such as Robinsons Land Corp. and Filinvest Land Inc.
have delivered projects in the last five years, we are expecting the
pioneer projects of Federal Land (The Residences Marco Polo), with
171 units, and Avida Land Corp (Avida Tower 1), with 518 units, to turn
over in 2013.
CEBU RESIDENTIAL CONDOMINIUMS
CUMULATIVE SUPPLY STOCK (END-2012)
LOCATION
NUMBER OF UNITS
CEBU CITY
4,678
LAPU-LAPU CITY
1,919
MANDAUE CITY
168
CEBU RESIDENTIAL CONDOMINIUMS
FUTURE SUPPLY STOCK
END-2012
2013
2014
2015
CEBU CITY
LOCATION
4,678
3,102
2,915
4,438
LAPU-LAPU CITY
1,919
-
154
651
MANDAUE CITY
168
757
212
-
6,765
3,859
3,281
4,562
TOTAL
P. 3
| COLLIERS INTERNATIONAL
CEBU | 2012 | THE KNOWLEDGE
RETAIL
Retail development in Cebu heightened, with more mall establishments
underway. At present, there are over 30 malls on the island, including
the recently completed SM Consolacion (57,000 sq m GLA) and J
Centre Mall (29,000 sq m). In other areas, new constructions and
expansion plans by major developer are being laid out such as the
Ayala Center Cebu extension (36,000 sq m), Robinsons Galleria
(56,000 sq m), and SM Seaside SRP (240,000 sq m). Meanwhile, the
Gaisano Group, a well-known retail developer in the Visayas region,
remains to position its projects in focused markets outside the Cebu
City proper, with four new mall developments in the pipeline.
The drive for developers to further boost their investments has been
primarily attributed to the locals’ increase in spending power. This is
further backed with the availability of large-scale developable land, a
high population, a healthy tourism market, and a generally strong
business environment in Cebu. The surge of outsourcing firms has also paved the way for retail hubs to emerge in commercial complexes or
through mixed-used developments. The strong spending from the BPO (Business Process Outsourcing) employees, who have relatively higher
disposable income, has contributed in the increase of store sales, thereby pushing developers to proceed with widening their footprints. Beyond
the impact of the BPO, the growth in the retail sector is likewise attributed to the continuous inflow of overseas Filipino remittances. Based on
the latest data from the National Statistics Office, there were about 148,900 deployed Filipino workers from Central Visayas in 2011, which grew
by some 10% year-on-year.
Cebu City, where commercial and business activities are primarily centralized, hosts more than half the total number of malls on the island. At
present, there are about 16 malls in the city, translating to over 600,000 sq m of gross leasable space. Most of the large-scale mall developments
are owned by major players, such as Ayala Land, SM Prime and Robinsons Land. Meanwhile, local player Gaisano has about five district-level
malls. Last year, mall developers in Cebu City benefited from the vibrant spending activities and high foot-traffic across districts, leading to an
average mall occupancy rate of 98.7%. Premium floor rents are likewise reasonable, ranging from between P500 to P1,200 per sq m per month,
with an average rent of P780 per sq m – a discount of about 30% compared to Metro Manila. Outlook on the growth of the retail industry in
Cebu indicates a further long-term increase, as various market sources expand driven by robust economic fundamentals.
P. 4
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CEBU | 2012 | THE KNOWLEDGE
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