Demand rise for Cebu commercial space

By: Administrator  |   12/17/2008 10:38:23 PM

CEBU CITY, Philippines - After a surge of residential subdivisions built in 2005 and 2006, the trend moved towards condominiums and office space in 2007. Few new subdivisions were opened last year compared to previous years.

More condominiums and office buildings were launched instead. This trend is not because of the lack of interest to develop residential subdivisions but because of the dwindling supply of raw land in Cebu City and areas near the metropolis.

To some analysts, the driving force for the real estate industry this year will be commercial and office space, led by the high demand among business process outsourcing (BPO) firms.

Old business district

Rents in establishments in the old business district of Colon are cheaper and more affordable.

However, fewer people have been frequenting the place. Perhaps because of dwindling business there, maintenance has been neglected. Few units are being developed or upgraded. Unlike a decade ago, more and more empty spaces can be seen in the downtown area driving rental prices there to below P300 per square meter. There are spaces for rent at the ground floor of buildings at only P187 per square meter.


Mandaue has generally been an industrial city with many companies based there. Lately, more companies have been established there. and more commercial establishments there as an offshoot of the development of Cebu City. Many restaurants, bars, and office spaces have been flourishing in the A.S. Fortuna area.

Along the stretch of A.S. Fortuna, one can find places ideal for offices or shops at less than P500 per square meter. Units which are off the main road can go as low as P250 per square meter or less. Warehouses in Mandaue are generally below P100 per square meter.


Near schools where snack bars, carenderias, and restaurants flourish, small spaces are available for as low as P200 per square meter. These areas include P. Del Rosario or Junquera Streets as well as streets around Southwestern University in Cebu City. Space for rent is sometimes subleased to small carts and other peddlers. Most businesses here are in the informal sector.

Business process outsourcing

Lack of space and high rent prices in Manila have driven many BPOs to look elsewhere such as Cebu. In recent years, we have witnessed how these big companies struggled to look for space until they decided to build the buildings themselves.

As of August 2007, Colliers International reported that there was an estimated 80,000 square meters of space used by around 17 BPO companies in Cebu. The average rate is P313 per square meter, against P1,018 per square meter in Metro Manila. At the IT Park, the average rate is P413 per square meter while the Cebu Business Park averages P413 per square meter rental.

Colliers reports office vacancy in Cebu City averages 7.4 percent. It further says that "Asiatown IT Park had the lowest vacancy of less than 1 percent due to increasing demand from the BPO industry. The Cebu Business Park was nearing 7 percent while the downtown area was recorded at 16.4 percent." The IT park may have a lower vacancy rate because it is an economic zone and offers incentives for its locators.


Colliers estimates Cebu's available office space at 161,294 square meters and said that the amount of space has been growing at a compound rate of 10 percent per year since 1990. However, only 36 percent are considered Grade A, located in prime business districts. Colliers estimates that 102,812 square meters of office space will be added in the next year or so in Cebu City. Commercial value in these prime areas like the Cebu Business Park is around P29,000 per square meter.


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