Makati, July 25, 2017 – Cebu remains a major retail hub outside of Metro Manila due to the proliferation of outsourcing companies; continued deployment of Filipino workers abroad whose monthly remittances fuel household spending; influx of local and foreign tourists; as well as sustained generation of employment opportunities in major economic sectors such as construction, manufacturing, and export processing. Overall, Colliers International Philippines has observed that despite the substantial increase in retail stock since 2008, overall vacancy remains low as the additional supply is offset by a continuously expanding local economy which effectively boosts Cebuanos’ disposable incomes.
BPO operations in Cebu City are continuously growing. The projected 5%-10% annual growth of Cebu’s outsourcing workforce should support the expansion of the city’s consumer base. Complementing the retail sector’s growth is the establishment of more knowledge process outsourcing (KPO) firms in the city that provide higher value outsourcing services such as health information management, software engineering, and finance and accounting. Among the major KPO firms currently operating in Cebu are Accenture, FPT Software, Cardno Engineering, Google, JP Morgan, Fluor Daniel, Medcor, and Dash Engineering. The influx of these companies boosted the share of KPO employees to Cebu’s outsourcing workforce to nearly 30% in 2015 from a mere 10% in 2008.
“We are optimistic that Cebu will continue to attract more KPO companies,” said Gerard Padriga, general manager of Colliers International’s Cebu office. “This is supported by the presence of adequate infrastructure, redundant internet connection, ample supply of skilled college graduates, and a high level of urbanization driven by the development of several townships and public infrastructure projects.”
According to Philippine Statistics Authority (PSA), the Central Visayas region accounts for about 5% of the total OFWs deployed per annum. Colliers believes that the sustained remittances will continue to fuel retail spending in Cebu City and its environs. More households in Cebu will continue to benefit from higher remittances as an increasing number of Cebuanos are being deployed overseas. The Philippine Overseas Employment Administration (POEA) projects total deployment to rise by at least 5% annually over the next five years, driven by continued global demand for highly-skilled Filipino workers.
The robust retail sector in Cebu is also being sustained by the influx of both foreign and domestic tourists. From January to November of 2016, Cebu attracted some 3.46 million domestic and foreign tourists, making it the most visited destination in the Philippines. The 2016 figure is 12% higher YoY. This will be supported by the completion of Mactan-Cebu International Airport’s (MCIA) new terminal which will have a capacity of 12.5 million tourists per annum, almost triple the old facility’s original capacity of 4.5 million. The proposed USD300-million Lapu-Lapu Leisure Mactan integrated resort and casino by Udenna Corporation will feature a high-end retail complex that should attract high-spending domestic and foreign tourists.
Manufacturing and export firms located inside Mactan Export Processing Zone have also been instrumental in propelling Cebu’s retail base. The influx of investors from China, Japan, and other Asian economies has sustained the growth of employment opportunities in Cebu which drives spending among nearly 3 million households.
Both local and national developers have lined up retail outlets that are projected to be completed over the next 12 to 36 months. Among those expected to be completed this year are Filinvest Il Corso and NorthDrive Complex of local developer Elin Land. The projects, once completed, will deliver an estimated 44,000 sq m of leasable space.
Other retail projects in the pipeline are Ayala Land’s Ayala Mall at Central Bloc located in Cebu IT Park as well as Ayala Land and Aboitiz Land’s Ayala Mall at Gatewalk Central in Mandaue City. The former will offer about 42,000 sq m of leasable retail space while the latter, a super-regional mall, will have more than 110,000 sq m of leasable area. The Gatewalk central mall will be anchored by a Landmark department store.
As of 1Q2017, Cebu’s retail stock stood at around 1.01 million sq m of leasable space, more than double the metro’s retail supply in 2008 of 465,000 sq m. As of 1Q 2017, overall retail vacancy in Cebu was practically stable at 2.2% from 2% recorded a year ago. “With an estimated 44,000 sq m of leasable space expected to be added to Cebu’s retail stock this year, Colliers sees overall vacancy hovering between 2%-4% by the end of 2017,” Padriga added.
Cebu’s average retail rents range from PHP230 to PHP980 per sq m per month, up 2-3% compared to year-ago rates. Colliers sees rental rates growing at the same pace over the next 12 months.
Metro Cebu’s dynamism as a major retail hub will be sustained by continued economic growth which fuels Cebuanos’ disposable incomes. According to the National Economic and Development Authority (NEDA) the Central Visayas region recorded an annual economic expansion of 7.2% from 2014 to 2016, making it among the fastest growing regions in the country during the period. Meanwhile, gross domestic product (GDP) per capita or the proxy for individual income, grew by an average of 5.5% per annum during the same period. This robust macroeconomic environment effectively boosts Cebu households’ propensity to consume.
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