Cebu market offers new investment prospects

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THE Metro Cebu property market, particularly the cities of Cebu, Lapu-Lapu, and Mandaue, “is very developed and has reached its maturity,” offering new opportunities for investors and developers with prices and amenities now rivaling those in Metro Manila, real estate consulting and services firm Pinnacle said in a market report.

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“In terms of cost of living and prices, this ‘Metro Cebu’ market is comparable to Metro Manila. In terms of education and culture, Cebu highly influences the Visayas and Mindanao,” Pinnacle explained.

The Makati-based firm recently announced it is opening an office in Cebu to meet growing demand for its services in the area.

Residential growth ‘phenomenal’
“The Metro Cebu residential market shows a phenomenal growth in the past four years, solidifying the acceptance of Cebuanos to ‘condo-living,’” the report said. Over the past four years, Pinnacle said the take-up of condominium units averaged 5,000 per year, building Metro Cebu’s residential condominium stock to about 22,284 units, a growth of 148 percent from about 9,026 units in 2013.

Pinnacle said it expects the 5,000 unit annual average to be the norm for at least the next few years. “This is to say that the projected increase may be comfortably absorbed by the market,” the report explained. “In addition, [the]stable increase in prices shows the soundness of the sector.”

The real estate firm said that the price per square meter has steadily increased by P4,000 to P6,000 per year since 2013, and over that timeframe has increased 18 percent from approximately P84,000 per square meter in 2013 to an average of P99,000 per square meter currently.

BPO driving office sector
“The Cebu office market follows the national trend where the BPO industry heavily drives the market,” Pinnacle said. There are approximately 120,000 BPO workers in Metro Cebu currently, about 10 percent of the industry’s national workforce.

Pinnacle said that the annual average growth rate of new office property stock in Metro Cebu is about 12 percent, at the low end of the projected growth rate for the BPO industry in the Philippines, which is expected to grow between 12 percent and 18 percent annually over the next five years.

By the end of 2016, there will be nearly 900,000 square meters of Grade A office space in Metro Cebu, with more expected to become available in the next years, the report said. This has driven vacancy rates up from a low of 2.45 percent in 2013 to nearly 17 percent now. Pinnacle said, however, that steadily increasing rents, which have increased by 21 percent in the past four years, show that the market is readily absorbing new office stock.

Pinnacle noted a similar trend in retail real estate, which the firm noted is still primarily made up of small spaces. Vacancy rates have increased significantly in the past four years, but have recently declined slightly, while rents have gradually increased, now averaging from P700 to P1,300 per square meter per month, higher than the P600-P1,200 average last year.

Industrial sector a bright spot
Growth in Metro Cebu’s industrial market has actually outpaced that of Luzon, the report said. “The industrial zones in Metro Cebu were filled up more than four years ago, well ahead of their counterparts in Luzon,” Pinnacle pointed out.

At present, there are 27 IT Parks/Centers; seven Manufacturing Zones; two Tourism Economic Zones; and one Agro Industrial Economic Zone within the three cities covered by the Pinnacle report, covering a total combined land area of about 120 hectares, with less than three hectares currently available for development. “In addition, there are also manufacturers located outside of these economic zones as well,” Pinnacle said.

Since there are limited available industrial spaces in Metro Cebu, a total area of 50 hectares is planned for a light industrial park in the ongoing reclamation in Minglanilla. This is a Public-Private-Partnership of the Philippine Reclamation Authority, Minglanilla and Cebu local governments, and the local developer Cebu Landmasters, the report explained.

Opportunities available
Although the Metro Cebu market has “matured,” Pinnacle concluded, “There are still gaps in the market and some market inefficiencies that shrewd players may take advantage.”

Areas that the firm identified as promising investment opportunities include the recently approved vertical socialized housing, along with an increase in the price and loan ceiling of economic housing that may extend growth in the residential sector. Planned township developments that will decentralize development in Cebu City are also potential opportunities, as is industrial development with the opening up of new land.

“Like most mature markets, healthy competition brings out the best designs and products at attractive rents and prices,” the report concluded.

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