KEY players in Cebu’s real estate industry are looking to adapt to new ways of doing business as the coronavirus disease 2019 (Covid-19) pandemic adversely impacted the local economy.

1Nito Tower is a development of Juanito King and Sons Inc., with 18 floors of office units rising
near the fast-growing commercial hub near Cebu Business Park.

During a Cebu property webinar hosted by leading property expert Santos Knight Frank last May 7, representatives from the real estate sector identified strategies ranging from work-from-home schemes to repurposing facilities, which will ensure continuity of business and maximize real estate assets without compromising the health and safety of employees and the community.

Santos Knight Frank’s online panel discussion focused on the outlook of Cebu’s property market and the impact of the Covid-19 pandemic. Industry experts included Kling Lacson, director for occupier services and commercial agency in Santos Knight Frank Cebu; Jan Custodio, head of research and consultancy of Santos Knight Frank; Jason King, president of King Properties; Jun Sa-a Jr., managing director of Cebu’s IT-BPM Organization (CIB.O); Franco Soberano, executive vice president and chief operating officer of Cebu Landmasters Inc.; and Brian Connelly, president of the American Chamber of Commerce of the Philippines Visayas Chapter (AmChamVisayas) and general manager of the Marco Polo Plaza Cebu.

The webinar was organized in partnership with AmChamVisayas and the panel was moderated by Rick Santos, chairman and chief executive officer of Santos Knight Frank.

Cebu property market in a glance

Cebu is regarded as an important investment destination outside Metro Manila and a key economic hub in the Visayas. However, with both a global pandemic and economic crisis happening together, the “double Black Swan” events have affected the outlook for Cebu’s real estate industry.

The current market situation may put immediate pressure on office rentals in Metro Cebu in the short term and may put companies’ expansion plans on hold. The ongoing crisis will also have a dramatic effect on retail as shopping malls have been closed during the enhanced community quarantine (ECQ). A decline in primary residential sales is also expected during the quarantine period as activities such like unit inspections are not possible amid the current situation.

Landlord responses

As the pandemic and the ensuing lockdown caused businesses to either stop or adopt work-from-home schemes, real estate players have reported disruption in cash projections, sales and construction projects. Despite the circumstances, developers and landlords have adopted new systems with respect to physical distancing and health requirements.

Jason King of King Properties said companies should now prioritize the health and safety of employees and key stakeholders, assessment of liquidity position to ensure business resiliency for the next few months, and a re-evaluation of the timetable for ongoing projects.

“We feel a responsibility for every one of our stakeholders: employees, contractors, suppliers, construction workers,” added Soberano of Cebu Landmasters. “It’s all about picking the right baskets right now and having a game plan not just for 2020 but for the coming years ahead.”

Need for healthier buildings

Cebu Business Park and Cebu IT Park continue to be attractive destinations for occupiers. More foreign firms are looking to outsource in the Philippines, especially in Metro Cebu, in order to cut costs.

“While majority of BPO (business process outsourcing) companies are doing more work-from-home set-ups, companies are also spending more just to remain operational as they provide hotel accommodation, transportation and other needs to employees who opt to work in the office,” said Sa-a of CIB.O. In a post-ECQ scenario, Sa-a projects that 30 to 40 percent of the workforce will continue to work from home.

In the long term, occupiers will have become more conscious on the impact of the workplace environment with regard the health, safety and well-being of their employees. The need for enhanced indoor environmental quality and a focus on healthier office buildings are to be expected.

“The concept of ‘healthy,’ well-managed buildings used to be a ‘nice-to-have, but now a ‘must-have’,” said Rick Santos of Santos Knight Frank. “Part of this should have continuous contact tracing for employees to feel safe and compelled to go back to work as the office sector is and will continue to be an important sector for businesses.”

Repurposing facilities

Cebu is one of the key tourist destination in the Philippines, and the current crises has an adverse effect on the local tourism and hospitality sector. As a response, real estate developers have come up with other uses for their properties to continue operating. Some have converted their facilities into alternative sites of operations of BPO companies as well as employee housing.

Connelly of Marco Polo Plaza Cebu said the hotel opened its doors to host BPO employees whose offices are located around the vicinity. There are also opportunities to convert function rooms and the like into workspaces and expand the offering of its retail center with more essential grocery needs.

Opportunities in the new normal

Besides residences, opportunities still abound in other real estate sectors such as industrial and logistics. “The industrial and logistics sector remains a bright spot for Cebu, driven by the shift to e-commerce and the continuous demand for essential goods,” said Santos.

“Landlord-occupier partnership is a long-term relationship. During these difficult times, both should be able to understand, listen and be flexible to survive and thrive in this crisis,” said Lacson of Santos Knight Frank, emphasizing the need for a win-win scenario between landlords and tenants.

In the long run, real estate players should not only prioritize liquidity, but also pivot their businesses to new opportunities and continue to stay resilient despite the difficulties they are facing.