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The Philippines newest leading investment destination, Cebu.

Santos Knight Frank has revealed that the Philippines city of Cebu will see an unprecedented supply growth in its office market within the next 3 years.

At a glance:

  • Real estate market to see a leap in office stock by approximately 350,000 sqm between 2018 and 2020, a growth of 47%.
  • Weighted average asking lease rates increased by about 2% to PHP548.31 during 1H 2018 from PHP536.96 in 2H 2017.
  • Done deals tracked by Santos Knight Frank were recorded with transacted rents of PHP 600 to 650 per sqm – a 9% increase from last year’s transacted rents.
  • Office capital values typically range from PHP 150,000 to 200,000 per sqm.

Metro Cebu’s real estate market will see a leap in office stock with as much as 350,000 sqm (gross leasable area) set to open between 2018 and 2020. Representing 47% of the existing supply in Cebu, the growth reveals the long-term positive outlook of developers amid healthy demand for office space by multinational companies and BPO firms, says leading real estate service provider Santos Knight Frank.

 

During the first half of the year, Cebu continued to see new investments enter its booming property sector, driven a strong local economy, the presence of a skilled labour force, affordable office lease rates and enhanced international connectivity with the launch of Mactan-Cebu International Airport’s Terminal 2.

Rick Santos, Chairman and CEO of Santos Knight Frank told WILLIAMS MEDIA that “With the launch of the new airport terminal and continuous economic expansion, Cebu now has a longer runway for growth. We expect American BPO expansion to continue alongside the influx of Chinese investments as Cebu becomes an important gateway of development in the Belt and Road Initiative.”

“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, a large pool of talent and new infrastructure in place, Cebu is well on its way to becoming a global city,” he said.

 

In the office market, weighted average asking lease rates increased by about 2% to PHP548.31 during 1H 2018 from PHP536.96 in 2H 2017. Done deals tracked by Santos Knight Frank were recorded with transacted rents of PHP 600 to 650 per square metre – a 9% increase from last year’s transacted rents. Meanwhile, office capital values typically range from PHP 150,000 to 200,000 per square metre.

Joey Radovan, Vice Chairman and Head of Occupier Services & Commercial Agency at Santos Knight Frank reveals: “By 2020, the greater Cebu business districts will have close to 1 million sqm of total space serving the office market. The IT-BPO industry will continue to drive commercial demand and traditional office operations will have the opportunity to upgrade to new, modern buildings for their front office needs.”

 

Residential demand

Prices across the residential real estate market have increased during 1H 2018 year-on-year. The affordable sector grew by 14.5%, midscale by 12.0% and high-end sector by 12.0%.

Buyers mostly consist of investors motivated by capital appreciation and leasing opportunities. A large volume of availed inventory was intended for employee housing of Chinese gaming companies. With the traffic congestion in the city, residential demand is also seen in city centres which are closer to offices. Buyers from South Korea, Japan and China – three of the top sources of foreign arrivals in Cebu – are reported to purchase bulk condominium units.

Tourism and hospitality

Cebu’s international visitor arrivals grew by 14% in 2017. Of the 4.9 million visitors who arrived last year, 54% were foreign guests. South Korea led the list of top sources of tourists, comprising 41.2% of foreign arrivals, followed by Japan (20.1%) and China (10.5%).

To support the influx of tourists, Cebu developers have partnered with international hotel operators to bring in leading brands such as Sheraton with AppleOne Mactan; Dusit Thani Mactan Cebu with Robinsons Land Corporation; Dusit Princess Cebu with Grand Land, Inc.and Citadines Cebu City and lyf Cebu City with Cebu Landmasters. Homegrown hotel brands such as Seda of Ayala Land Hotels and Resorts Corp. and Aruga of Rockwell are also in the pipeline.

A rising gaming destination, Metro Cebu will soon see integrated resort projects such as Emerald Resort and Casino of Udenna Development Corp. in Lapu-Lapu City, Pan-Asia Millennium Hotel and Resort’s Inc.’s casino resort in Mandaue City and the Gokongwei- owned, Universal Hotels and Resorts, Inc.’s Isla dela Victoria in Cebu’s South Road. Properties generate more arrivals in Cebu.

“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,” Santos added.

 

Emerging cities in Visayas 

Migration to Cebu from other Visayas provinces has been key in driving demand across all real estate sectors. As the Cebu real estate market continues to grow, other real estate market players are setting up in the fringes of the city and other areas within the Visayas region, building more competition and facilitating growth in secondary areas. With the presence of employment opportunities in other provinces of Visayas, it is possible for the Cebu migration to decrease.

Iloilo and Bacolod are two destinations exhibiting increasing commercial and development activities, particularly the Iloilo Business Park, Bacolod Capital Corporate Center and Bacolod Capital Central Mall.

 

Source: Santos Knight Frank

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