Cebu property market nearing maturity

CEBU, Philippines – New township developments may spread out the centralized development in Cebu City, according to Pinnacle Real Estate Consulting Services, at it considers the Cebu real estate market reaching its maturity.

In its recent study, Pinnacle said although the Cebu property market is very developed, "there are still gaps in the market and some market inefficiencies that shrewd players may take advantage."

"The recently approved vertical socialized housing, and the increase in the price and loan ceiling of economic housing may extend the boom in the residential sector," the property consultant said.

However, it advised developers to have proper due diligence and detailed market study due to competition.

"Like most mature markets, healthy competition brings out the best designs and products at attractive rents and prices," it said.

Pinnacle noted that Cebu's residential market shows a phenomenal growth in the past four years, signifying the acceptance of Cebuanos to condo living.

In terms of residential stock, the Cebu market now has approximately 22,284 condominium units. This is a considerable growth of 148 percent from about 9,026 units in 2013. In addition, an average of 5,000 units will be delivered in the next couple of years.

In terms of take-up, the average take up is 5,000 condominium units annually in the past four years. This is to say that the projected increase may be comfortably absorbed by the market.

Office  Market

The Cebu office market follows the national trend where the BPO industry heavily drives the market. At present, there are more than 120,000 employees in the Cebu BPO industry or approximately 10 percent of the total BPO employees in the country.

"The Philippine BPO industry grew by an annual average of 20 percent in the past decade. In the next five years, industry experts are forecasting a growth range between 12 percent to 18 percent. World-wise, the projected BPO growth for the coming years is a steady six percent," Pinnacle said.

By the end of 2016, close to 900,000 square meters of Grade A office spaces comprise the office market in Metro Cebu. This is approximately 50 percent growth in the past four years, or an average annual growth of 12 percent.

"Four years before that, from 2009-2013, the average growth is 15 percent. While the growth is slightly slower, it reflects the maturing market and the Philippine office market in general," Pinnacle further said.

Vacancy-wise, it started at a low of 2.45 percent in 2013. Due to the increasing stock, vacancy steadily increased as well. The estimated vacancy is 7.9 percent in 2014; 11.5 percent in 2015; and 17 percent at present. Nonetheless, rents would show that the market is absorbing the increasing office stock.

Retail

The retail market is typically composed of mall spaces, and in recent years, commercial spaces in office and residential buildings are considered. The Cebu retail market is robust led by the homegrown leaders like Gaisano Groups and the strong presence of national players.

According to Pinnacle, total commercial-retail spaces recently is estimated at 1,080,000 square meters due to the steady completion of the sprawling SM Seaside Cebu. This is a phenomenal 98 percent growth from the estimated 545,000 sqm of retail spaces in 2013.

Due to the rapid growth in retail spaces, vacancy increased in the past four years. The estimated vacancy rate of commercial retail spaces started at a low of 2.55 percent in 2013, and actually dipped to just 2 percent in 2014. Due to the increasing retail stock, estimated vacancy increased to 12 percent in 2015 when more than 200,000-sqm of retail spaces were offered to the market. Vacancy dipped again to 9 percent at present, since the market is steadily absorbing the vacant retail spaces. Rents also show that the strength of the Cebu retail market.

Hotel  Market

On the hotel market, Pinnacle estimates that the Cebu has a total of approximately 9,500 hotel rooms with star-classification. This total stock grew from 7,800 rooms last year, or an increase of 22 percent.

Even with the increase, average occupancy increased to 90 percent this year, as compared to 85 percent last year. "In terms of room rates, deluxe hotels have an average room rate of P3,800 per night. There is an increase of 9 percent, from P3,500 per night, even when new hotel rooms were opened to the public. The healthy occupancy and room-rate level bode well for the Cebu hotel market," said the property consultancy firm. (FREEMAN)