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Office market opportunities emerge post Typhoon Odette

Typhoon Odette, Business continuity plan, Cebu, Business process outsourcing, Office real estate

Amid disruptions caused by the Covid-19 pandemic and Typhoon Odette, many outsourcing occupiers in Cebu continue to implement a work-from-home setup. The evolving needs of occupiers may ultimately unlock short- and long-term opportunities for the office market.

Several provinces in the Visayas and Mindanao were severely affected by Typhoon Odette, including Cebu. The province dealt with power outages, damaged utility poles, and inoperative communication lines, while various establishments, including office buildings, heavily relied on power from generator sets, creating an artificial shortage on fuel. People persisted through limited transportation and long queues in ATMs and supermarkets to obtain essential supplies.

The Information Technology and Business Process Management (IT-BPM) industry, which employs about 200,000 workers in Cebu in 2021, was also significantly disrupted. More than 70% of IT-BPM companies had been implementing a WFH setup to protect their employees, which became more challenging after the typhoon left many residential communities heavily damaged. The restoration of electricity, water, and telecommunication lines would possibly take months for some places. Since many IT-BPM locators generate revenue on a per-seat and per-minute basis, these companies carried out business continuity plans (BCP) to immediately provide employees with a workspace that has Internet access and electricity. This resulted in high demand for fully fitted or “plug and play” spaces; occupiers searched for such options across Metro Cebu, while others flew their employees to unaffected cities, including Metro Manila.

Challenges and opportunities in the Cebu office market after Typhoon Odette

Several “plug and play” office facilities were immediately leased out in the aftermath of Odette as locators raced to keep their operations running. Colliers has observed that several IT-BPM players have signed leases in such facilities in the short-term or until electricity providers reenergize their employees’ respective areas.

Apart from high competition for fitted office spaces, there remain some challenges for certain occupiers whose “must-haves,” such as flexible lease terms, required area size/number of seats, and generator set capacity, are not yet being met. Not all landlords provide Internet connection and air conditioning, which are integral to the tenants’ operations. Furthermore, social distancing still needs to be observed and most occupiers need to follow a one-meter- or one-seat-apart setup in the workplace, which translates to a larger-sized office requirement and entails additional costs. All these challenges may cause delays in the implementation of BCPs.

Despite these challenges, Colliers believes that the Cebu office market is well positioned for recovery. By the end of Q3 2021, Colliers recorded positive net take-up for three consecutive quarters, reflecting increased business confidence among occupiers. While vacancy remains high at 22% and is still expected to increase given the forecasted upcoming supply, Colliers is optimistic that the abundance of new office buildings and PEZA-proclaimed spaces in Cebu will continue to attract IT-BPM locators and other occupiers to the province. As the largest outsourcing hub outside Metro Manila, Cebu remains a preferred business destination due to its competitiveness in terms of manpower, infrastructure, and cost of doing business. With over 41,000 sqm in flexible workspaces built across at least 23 facilities in Cebu and the increasing demand for BCP sites, IT-BPM locators and flexible workspace providers alike should be motivated to continue growing in this province.

 

Colliers view

In view of the above challenges and opportunities, Colliers urges office landlords and seat-leasing providers to be adaptable in providing what tenants require such as operational telecommunications services, Internet connectivity, air-conditioning, and amenities that ease the move-in process. Colliers also urges lessors to be flexible with their offered commercial terms and lease durations during these extraordinary times. Additionally, Colliers encourages flexible workspace providers to gauge interest for fitted spaces in the market and create more plug-and-play facilities that capture the evolving needs of occupiers.

Having a robust BCP has never been more vital towards ensuring the protection of an organization’s operations, assets, and employees especially during times of great uncertainty and disruption. With the learnings from the Covid-19 pandemic and Typhoon Odette, Colliers urges occupiers to revisit their BCPs and consider additional office spaces as BCP sites that can accommodate employees during disruptions. Moreover, occupiers can reassess the readiness of their current office buildings in terms of their response capabilities during emergencies and technical specifications and look for quality buildings that can operate even with the use of a generator alone for several days. Colliers also recommends for occupiers to explore partnerships with flexible workspace providers for BCP packages where staff will immediately have a facility to work in.

As the needs of occupiers evolve in the face of the health and environmental emergencies, opportunities to provide greater value and ensure the continuity of businesses shall also emerge.

For more information on the office real estate market, talk to our Tenant Representation team.


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