Offshore Demand Requiring More Office Space in Cebu
Driving a projected 47% growth in office supply in the next three years is the demand for business process outsourcing (BPO) firms and multinational corporations locating in Metro Cebu, according to real estate consultancy Santos Knight Frank.
Rick Santos, Santos Knight Frank CEO, said, “The growth of Cebu’s property sector this year solidifies the metropolis’ position as the leading investment destination in the Philippines outside Metro Manila. With a strong economy, large pool of talent and new infrastructure in place, Cebu is well on its way to becoming a global city.”
Metro Cebu will add as much as 350,000 square meters (3,767,369 sq. ft.) in gross leasable area to its office stock from 2018 to 2020. This will bring the total office stock in the area close to 1,000,000 sq. m. (10,763,910 sq. ft.) by 2020.
The growth is due mainly to the demand for office spaces from BPOs and multinational firms, which, in turn, has pushed lease rates higher in the first half of 2018. Weighted average asking lease rates went up by two percent to P548.31 ($713.30) in the first six months of the year, compared to the second half of 2017.
Cebu has an excellent IT infrastructure, a dedicated workforce and adheres to many Western cultural norms — meaning, there are very limited language and cultural barriers in regard to working with American companies — and they are eager to learn and easily coachable.
The majority of buyers are investors seeking capital appreciation and leasing opportunities. However, software development companies like Full Scale also seem to be driving demand. A high volume of availed inventory was purchased for the housing of these companies’ employees.
Playing a large role in the demand for office space is the opening of the second terminal of the Mactan-Cebu International Airport last July, as it has further enhanced international connectivity in the area.
“The launch of Mactan-Cebu International Airport’s Terminal 2 is a particularly exciting development. While a number of cross-border transactions have recently been closed in Cebu, in particular from China, South Korea and Japan, the improvements to the airport will further increase tourism, facilitate greater inflow of capital and help continue the metropolis’ growth momentum in the coming years,” said Mr. Santos.
Along with the surge in office supply, the residential property market has also seen double-digit growth across different price points. The affordable sector increased 14.5% in the first half of 2018, midscale rose by 12%, and the high-end sector went up by 12%.
Full Scale’s Founders saw this potential first-hand and have been investing in Filipino developers for nearly a decade, and it has paid off. Cebu has the allure of mountain and ocean views, and it has a growing and established community of IT professionals. The Philippine government is also a big factor, as they locally embrace and support the growth of the offshoring industry.