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Flight-To-Quality Redefines Cebu Office Market

The Cebu Office Market has seen a substantial progress over the past few years due to the continuous influx of the outsourcing businesses. It remains a top outsourcing location outside of Metro Manila due to skilled manpower and presence of quality office space.

Local players

The demand has compelled homegrown players to compete and contribute to new supply in the business districts.  These developers include Innoland Development Corporation, Cebu Landmasters Inc., Skyrise Realty, etc. developing office towers such as Cebu Exchange, One Montage, and JEG Tower that are LEED-certified. This is indicative of the evolution of office space requirements in Cebu which is attributable to the influx of discerning occupants including business process outsourcing (BPO) and knowledge process outsourcing (KPO) companies.

Cebu office space vacancy

The vacancy between these two locations stood between 9.4% and 9.7% as of end-2019 and we see vacancy hovering around 8% over the next 12 months due to sustained take-up. Rents have increased by 8% YoY to a range of Php650.00 to Php900.00 per sq metre. Colliers sees an annual new supply of 105,000 sq metres (1.13 million sq feet) from 2020 to 2022. About 63% of the new space during the period is classified as Grade A and around 14,700 sq metres (158,200 sq feet) of it is LEED-certified. More than 43,000 sq metres (462,800 sq feet) is awaiting LEED certification.

 

New locators and expansions within Metro Cebu

COLLIERS FLASH | Flight to quality table 1

Flight-to-quality: Occupants moving to newer and higher quality buildings

COLLIERS FLASH | Flight to quality table 2

Colliers View

Colliers has observed that several firms in Cebu have been implementing flight-to-quality to be able to: 

  • Design a modern workplace that enhances to the welfare of employees. Work environments have a big impact on productivity. A dull, outdated office can affect employee morale and productivity which will likely affect the company’s profitability.  
  • Achieve better floor efficiency that gives more carpetable space. These new buildings are built to be BPO-ready and one critical factor that these companies look at is how many seats can they fill in the carpetable space. The more seats they put in the building the more marketable the building is.
  • Install a better air-conditioning system to provide better air quality within the leased premises and lower power consumption with the availability of inverter type air-conditioning systems. With the VRF system being the new standard, occupiers have full control on their power consumption for air conditioning. 
While occupiers may initially think that relocating to a new and better-quality building is more expensive, they must understand that there are more benefits in the long term in the form of lower attrition, better employee engagement, and higher retention which result in higher productivity. Thus, Colliers Philippines encourages occupiers to look for available and better-quality offices in the market that enable occupants and their employees to maximize space and reinforce their branding. Choosing the right quality of building and location for your office will certainly go a long way in this very dynamic age.