Cebu office vacancy rises to 13.9%

CEBU, Philippines — Office building owners in Cebu should prioritize upgrading aging properties rather than relying on rent discounts if they want to remain competitive against a wave of new developments entering the market, according to property consultancy CBRE, which warned that tenants are becoming increasingly selective in a softer leasing environment.

Based on CBRE latest data, about 31 percent of Cebu’s available office inventory is now more than 10 years old, while 35 percent is between six and 10 years old and 34 percent is less than five years old, highlighting the growing challenge for landlords as fresh supply enters the market.

The advisory comes as Cebu’s office sector faces rising vacancies, cautious occupiers and an influx of new office towers that could reshape leasing competition over the coming quarters.

“Playing defense” has become the new strategy for landlords, MJ Castro, CBRE’s Head of Operations for Property Management, said during the firm’s second-quarter 2026 market briefing in Cebu, noting that retaining existing tenants has become more valuable than chasing new ones.

“Older buildings don’t have to be outplayed by new developments,” Castro said. “What’s critical is having a clear asset management plan and making the necessary improvements to remain competitive.”

Rather than offering deeper rental discounts, landlords should conduct technical assessments to identify immediate repairs, modernize common areas, replace aging air-conditioning and mechanical systems, and improve operational efficiency to lower common utility and service charges, he said.

Occupiers are now evaluating office spaces based on total occupancy costs instead of headline rental rates alone, making operating expenses, building efficiency and maintenance standards increasingly important in leasing decisions.

CBRE noted that tenants are also using the age and condition of buildings as leverage during lease renewal negotiations, seeking not only lower rents but also firm commitments from landlords to upgrade facilities.

The consultancy firm warned that leaving office floors vacant has become increasingly costly. Even unoccupied spaces continue to incur maintenance, security and utility expenses, while prolonged vacancies can erode returns more than targeted capital improvements.

Castro said landlords should also reassess long-vacant floors to determine whether renovations, flexible workspace conversions or other alternative uses could generate income instead of allowing spaces to remain idle.

The recommendations come as Cebu prepares for a significant expansion in office supply later this year, including large developments outside the traditional business districts.

CBRE said landlords of existing buildings have only a limited window to reposition their assets before the new inventory heightens competition.

The consultancy also encouraged building owners to pursue environmental, social and governance (ESG) certifications, saying multinational occupiers increasingly consider sustainability credentials alongside location, rental costs and building quality when selecting office space.

Despite leading provincial office markets with 9,200 square meters of net take-up in the second quarter, Cebu’s leasing activity remained subdued. Vacancy rose to 13.9 percent from 13.7 percent in the previous quarter, ending five consecutive quarters of improvement.

CBRE expects vacancy to climb further as approximately 30,000 square meters of shadow office space in Cebu IT Park alone is scheduled to return to the market, alongside thousands of square meters of new office completions before year-end.

With tenants enjoying abundant choices, the consultancy said the competitive advantage will increasingly shift toward landlords willing to invest in upgrading older assets rather than depending solely on price concessions to secure occupiers.

CBRE, is one of the world’s largest commercial real estate services and investment companies. Headquartered in Dallas, Texas, it provides advisory and transaction services for office, industrial, retail, hotel, residential and mixed-use properties.