RESEARCH

METRO MARKET UPDATE 2H 2018

METRO CEBU REAL ESTATE SECTOR REVIEW CEBU REGAINS ATTRACTIVENESS AS A GO-TO SPOT FOR BUSINESS AND LEISURE ACTIVITIES COVER | Investments and Tourism further drive ’s growth in the second half of 2018

Heavy business and construction investments is noted in the fringes Exciting investment prospects activities in Metro Cebu are and surrounding cities. A great deal abound Metro Cebu, backed by the primarily observed in three of the of business and investments continuously growing local and area’s major cities, , activities have been detected in regional economy, newly opened City and Lapu-Lapu City. Mandaue City in particular. The -Cebu International Airport Cebu City has consistently been property sectors in Mandaue were (MCIA) and other proposed one of the preferred outsourcing perceived to be growing at a government infrastructure destinations in the world. Coming remarkable rate, following the low developments. Bridges designed to from the 12th spot in 2017, Cebu vacancies and almost full saturation connect Cebu to the other nearby City rose a level up to the 11th spot of Cebu City. islands, such as and Negros, of the latest Top 100 Super Cities are expected to further enhance the list released by Tholons, a Aside from boasting of a good ease of doing business between renowned international strategic business environment, Cebu Metro Cebu and adjacent areas. In advisory firm. The competitive talent continues to attract local and addition, road networks in the pool and cheap labor cost remain foreign tourists with the various pipeline will facilitate a smoother as major considerations in choosing leisure activities that could be done travel experience from Danao City in Cebu City over other locations. in the area, especially in Lapu-Lapu the north and Naga City in the Moreover, the digital transformation City where the picturesque beaches south, to Metro Cebu, which will of Cebu led by the local IT-BPM and resorts are located. In addition, result to faster and more efficient sector and the lined-up to complement the growing number business transactions. Investors are infrastructure developments were of hotels, resorts and other forms of therefore highly encouraged to take significant factors in the city’s accommodations, lifestyle shopping advantage of the many improved positioning. centers rise in volume to meet opportunities and become an demand by local and foreign guests essential contributor to the ever- Cebu City demand has caused for added recreation, shopping, and developing Metro Cebu property severe congestion in the city core dining options. market. such that an increased level of

Source: Tholons

Page 2 Page 2 CEBU OFFICE SECTOR ENDED 2018 ON ANOTHER HIGH NOTE

Office | Investors displayed sustained optimism in the office market

Numerous construction works, The total office stock in Cebu IT During the second half of 2018, influx of new office space supply, Park (CITP) increased by 40,203 Metro Cebu’s net absorption was and growing modern trends square meters, following the recorded at 101,141 square characterized the Metro Cebu office completion of Filinvest Cebu meters. The net absorptions of market as it closed 2018. Investors office buildings in CBP and fringe are looking forward to the large Cyberzone 2 and HM Tower. The office supply for completion in the two office buildings targets BPO areas were a few square meters coming years. companies. short of 40,000 at 39,885 square meters and 39,945 square meters, FIGURE 1 Areas in the fringes of CBP and respectively. CITP’s net absorption, Total Metro Cebu Office Stock (sq.m.) CITP likewise documented an on the other hand, was 21,311 increase in total office supply. New square meters, significantly higher 350,000 buildings in the fringes added than 8,884 square meters in the 300,000 29,056 square meters of GLA to the first half of 2018. total office stock outside the major 250,000 business districts of Metro Cebu. LEASE RATES 200,000 Newly completed buildings in the Metro Cebu’s overall weighted 150,000 fringe areas include The Space along AS Fortuna and Northpark average asking lease rate passed 100,000 Building along UN Avenue in the PhP600-mark in the second half of 2018. Rents in Metro Cebu rose 50,000 Mandaue City, and Pacific World Tower in Megaworld Corporation’s to 11.82% half-on-half (h-o-h) and 0 Mactan Newtown in Lapu-Lapu 14.20% year-on-year (y-o-y) to Cebu Cebu IT Fringe PhP613.15 per square meter per Business Park Areas City. Park month. Developers and landlords H2 2017 H2 2018 VACANCY & ABSORPTION were able to command higher rents due to the robust office demand Source: Santos Knight Frank Research Office vacancy in Metro Cebu and dwindling supply in Metro remained below 10% in the second Cebu. Moreover, the superior half of 2018, despite the significant NEW SUPPLY quality, innovative design and better increase in office supply. The 7.87% handover conditions of leasable Recent building completions and vacancy rate signifies a healthy spaces enabled a number of handovers resulted to a 14.40% or demand for office space, which is lessors to exact higher rents, pulling 106,253-square meter increase in mainly driven by BPO companies. up the weighted average rents in Metro Cebu’s total office stock Moreover, the Metro Cebu vacancy the area. Handover condition of (from the first half of 2018). As of rates have been on a downward units vary from bare-shell to warm- the end of 2018, Metro Cebu’s trend for the past 3 years, aggregate supply was recorded at shell, extending to fully-fitted notwithstanding the constant 844,377 square meters of office spaces. Gross Leasable Area (GLA). 12.58% increase in office stock summing up of this was identified as new supply. to 258,531 square meters since the CBP continued to record the 1st half of 2016. highest weighted average lease rate In (CBP), three among the Metro Cebu business new buildings went online in the CBP’s vacancy rate was districts at PhP689.16 per square second half of 2018, adding 36,993 remarkable at 2.35%, as it retains meter per month. Rents in CBP square meters of office space to the its position as the leading business grew 9.82% from the first half of total GLA in the area. MDCT district in Metro Cebu. The vacancy 2018 and 16.19% from the same Building and Tech Tower launched rates of CITP and fringe areas were a combined total of 20,228 square period last year. 8.5% and 12.16%, respectively. meters of office space, specifically suited for Business Process Although above 10% in the second Cebu IT Park documented a Outsourcing (BPO) companies. On half of 2018, the vacancy rate of weighted average lease rate of the other hand, BPI Cebu office buildings in the fringe areas PhP632.99 per square meter per Corporate Center, with a GLA of essentially dropped from 17.32% in month, corresponding to 16,765 square meters caters to the first half of 2018. escalations of 11.65% h-o-h and traditional office occupiers. 14.47% y-o-y.

Page 3 3 Rents in the fringe areas remained within 2019. Central Bloc Tower 1 will be comprised of a shopping most affordable at a weighted will rise above the mall, an educational institution, average of PhP529.39 per square Central Bloc to maximize the use of hotel developments, residential meter per month. Although the roughly 2.5-hectare land inside condominiums, and a series of recording the cheapest weighted CITP. office buildings, which are already average lease rate in Metro Cebu, catering to BPO as well as rents in the fringe areas continued RISE OF MIXED-USE PAGCOR-enabled occupiers. All to increase at rates of 13.17% DEVELOPMENTS existing office projects in Mactan semi-annually and 8% annually. Since Metro Cebu’s major business Newtown are completely leased out districts are almost at full capacity, to international occupiers. BPI Cebu Corporate Center Furthermore, Megaworld plans to Source: Alveo Land property developers shift to the fringe areas and develop mixed-use construct 2 additional office projects that are self-sufficient and buildings in the remaining 6,000 sustainable. square meters of vacant land within the development. Base Line Center of , Inc sits on a 1.6- hectare land along Juana Osmeña Astra Centre Source: Cebu Landmasters Street. Base Line HQ is a 21-storey office development that will offer 4,700 square meters of office GLA and 5,900 square meters of leasable retail.

Soon to rise in Mandaue, Astra Corporate Center will introduce 28,000 square meters of office GLA to the market. It is the office component of a 1.2-hectare mixed- use development, Astra Centre, which is situated along AS Fortuna UPCOMING OFFICES Street. Approximately 520,000 square In the North Reclamation Area, meters of office space will be added Robinsons Land Corporation has to the Metro Cebu office supply the 18,848-square meter Cybergate within the next 3 years. Several Galleria Cebu in the present mixed-use developments will be pipeline. It will complete the 4.7- FIGURE 2 highlighting new office hectare Cebu Upcoming Office Supply in Cebu as developments, boosting Metro Complex of integrated components of H2 2018 Cebu’s office stock to more than such as existing BPO offices, 1,000,000 square meters by the Summit Hotel Cebu and Galleria end of 2019. About 170,000 square Residences Cebu. Cebu Business Park meters of office GLA will be Cebu IT Park completed within the vicinity of and Aboitiz Land’s joint Fringe Areas CBP. Notable Grade A venture development, Gatewalk developments such as Latitude Central, is a well-anticipated project Corporate Center, One Montage, in Mandaue City. To be situated JEG Tower, Johndorf Tower, 1Nito beside the upcoming Ayala Malls Tower, and PNB Cebu Tower are Gatewalk Central is the 20,000- presently in the CBP office pipeline. square meter Gatewalk Central 31% 32% BPO building. Developments by Ayala Land, Skyrise and Arthaland will create Megaworld Corporation’s Mactan 192,000 square meters of leasable Newtown is the main business area office space in CITP. Skyrise in Lapu-Lapu City. The 28.8- 37% Realty’s Skyrise 4 Tower B and hectare mixed-use development Ayala Land’s Central Bloc Tower 1 are scheduled to be completed Source: Santos Knight Frank Research

Page 4 GROWING CO-WORKING FIGURE 4 MARKET Weighted Avg. Lease in Metro Cebu Rate (PHP) vs. Rental Growth Rate (%) The market for shared office and co-working space has developed in 700 14% Metro Cebu. Various international co-working players already set foot 600 12% in Metro Cebu. ASpace, Regus, 10% and iiOffice, which are known 500 workspace solutions providers in 8% Metro , continue supplying 400 shared office spaces in CBP, CITP 6% 300 and fringe areas, respectively. 4% Moreover, well-known international 200 co-working player, “WeWork”, 2% announced expansion plans in 100 0% Megaworld’s Mactan Newtown. 0 -2% The Company from Fukuoka, Japan H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 is a new co-working player, opening 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 a branch in the newly-operational Lease Rate Growth Rate HM Tower in CITP. A day pass in The Company is priced at PhP400 Source: Santos Knight Frank Research per seat.

Local and homegrown players, such as King Properties, started providing co-working options to business start-ups, freelancers, and young professionals. Avant Offices in Avenir Building, located along Archbishop Reyes Avenue, has launched co-working spaces with daily rates starting at PhP700 per seat.

FIGURE 3 Weighted Average Lease Rate per Co-Working Space CBD (PhP/sq.m./mo.) Source: iiOffice Cebu

800 Regus Office Source: Regus Cebu 700 600 500 400 300 200 100 0 Cebu Cebu IT Fringe Business Park Areas Park

H2 2017 H2 2018

Source: Santos Knight Frank Research

Page 5 INVESTOR-DRIVEN DEMAND FORTIFIED CEBU'S RESIDENTIAL SECTOR Residential | Industrial projects seen to propel demand

The Metro Cebu residential sector Given the limited available supply of FIGURE 5 continued to exhibit optimistic residential units in Lapu-Lapu City, Allocation of Condominiums per market sentiments in the second the take-up rate in the area has Classification half of 2018, as evidenced by the slowed to an average of 3.5 units robust demand coming from both per month. Nevertheless, the local and foreign investors. The demand should strengthen as the 10.2% thriving IT-BPO industry and market looks forward to the Cebu- expanding PAGCOR-enabled Cordova Link Expressway, the third 30.6% companies resulted to an influx of bridge connecting Cebu City to expatriates looking for employee Mactan Island. The road housing in Cebu. Overseas Filipino infrastructure is set to be 59.2% Workers (OFWs), who are looking operational by 2021. New project for retirement options and launches are expected in order to investment opportunities in real cater to the generated demand High-end Mid-end Affordable estate properties, likewise from improved accessibility upon contributed to a faster residential completion of the new expressway. Source: Santos Knight Frank Research take-up. Overall take-up rate in Metro Cebu reverted to double Property developer Primeworld FIGURE 6 digits at 11.8 units per month, Land has stated the company’s Average Monthly Take-Up Rates per coming from 9.4 units per month in intention to invest in the city by Classification (Units) the previous half. Of the total units master planning a new residential floated in the market, 92.5% were complex to be named Primeworld absorbed as of the end of 2018, District. The project will feature 7 25.0 19.2 higher than the 88.7% in June residential condominiums and 36 20.0 2018. private villas that will add 2,023 units to the total residential stock in 15.0 9.1 TAKE-UP AND ABSORPTION Lapu-Lapu City. 10.0 7.3 RATES In addition, affordable residential 5.0 Mandaue City realized the highest projects are less common in Metro 0.0 take-up rate in Metro Cebu at an Cebu at present. Property High-end Mid-end Affordable average of 51.1 units per month. developers chose to compete in the Source: Santos Knight Frank Research The city is getting renewed high-end playing field, where the attention from investors and end- market has been identified. users with the construction of various infrastructure projects. The FIGURE 7 first phase of the proposed Metro Indicative Average Prices per Area (PhP/sq.m.) Cebu Expressway, which is scheduled to be completed by 2022, will traverse Mandaue City 300,000 253,678 and Cebu City. The second 250,000 underpass project along UN Avenue 196,813 200,000 178,327 174,569 is another infrastructure 139,172 143,553 ▲20.3% 150,000 development in the pipeline, ▲8.5% designed to minimize travel time 100,000 ▲15.4% from Mandaue City to Mactan- 86,399 86,957 50,000 67,741 Cebu International Airport (MCIA). 58,757 62,545 72,289 0 Cebu City followed Mandaue City in 2H 2017 2H 2018 2H 2017 2H 2018 2H 2017 2H 2018 terms of take-up rate. The average Mandaue City Cebu City Lapu-Lapu City take-up of residential projects in Cebu City was pegged at 7.7 units Source: Santos Knight Frank Research per month. Of the 31,875 units floated, 91.9% were already sold. Page 6 5 High-end absorption rate rose to NEWLY-LAUNCHED PROJECTS Sun Park Royal 98.3% in the second half of 2018 Source: SunKai Land from 80.8% in the previous half. The booming residential market in High-end developments continued Metro Cebu led to a number of new to have the highest take-up rate, project launches. In the second half averaging at 19.2 units per month. of 2018, homegrown developer Priland Development Corporation In terms of unit type, studio units launched projects in Lapu-Lapu remained the preferred unit type, City and Cebu City. Paseo Grove in especially by investors capitalizing Lapu-Lapu City targets employees on the sizable rental market in from export processing zones and Metro Cebu. industrial parks. In Cebu City, Vertex Central added 701 SELLING PRICE residential units to the total supply The robust demand for residential in the area. The project will be units enabled property developers constructed along Archbishop to increase the selling prices across Reyes Avenue. The building Metro Cebu. Mandaue City completion is slated in 2022. experienced the highest half-on-half Moreover, Cebu Landmasters, Inc. growth in prices at 14.9%, following started the pre-selling of One Astra the remarkable take-up rate of Place within the Astra Centre in NOTABLE TREND residential projects in the area. The Mandaue City. Fifteen floors of the Similar to , township performance of the newer projects mixed-use development will be significantly pulled up the selling developments and mixed-use residential floors, offering a total of projects have gained popularity in prices in Mandaue. The less than 478 units. 1% growth from the 2nd half of 2017 Metro Cebu. Due to the further to the 1st half of 2018 soared to an Furthermore, after completely worsening traffic situation in Cebu’s almost 15% growth from the 1st half selling out its first residential project, major cities, residents started of 2018 to the 2nd half of 2018. Cebu-based developer Sunkai Land seeking the convenience of living Selling prices in Mandaue currently recently launched Sun Park Royal proximate to the workplace and range from PhP67,741 to Hotel and Residences. The mixed- retail establishments. Several PhP143,553 per square meter. use tower is located along Juan mixed-use components are being Luna Avenue in Mandaue City. A included in the master planning of Although Mandaue documented the total of 448 units, to be comprised projects to create a sustainable highest h-o-h growth, y-o-y growth of studio, one-bedroom, and two- township. was greatest in Lapu-Lapu, where bedroom units, will be available y-o-y price escalation was at upon its completion in 2022. 20.3%. Lapu-Lapu demand To be continued on page 12 remained strong while supply continued to dwindle, allowing considerable price increases. Quay Towers Source: Mandani Bay Selling prices in Lapu-Lapu City ranged from PhP86,957 to PhP253,678 per square meter. Cebu City maintained a steady increase in prices in the second half of 2018, growing 8.5% y-o-y and 2.2% h-o-h. Minimum price in the city was pegged at PhP72,289 per square meter while maximum price was recorded at PhP174,569 per square meter.

Page 7 CEBU RETAIL SECTOR REMAINS ROBUST WITH INCREASED ACTIVITIES IN THE AREA

RETAIL | Consumer demand heightens as Cebu welcomes more local and foreign guests

As Metro Cebu continues to attract Holdings Inc., a subsidiary of Ayala Cebu is within CBP, tourists, investors and firms, the Land Inc (ALI). which is Metro Cebu’s leading local retail industry experienced business district, while SM City Cebu is in one of the busiest parts sustained growth in the second half In Mandaue City, Gatewalk Central is a much-awaited mixed-use of Cebu City’s North Reclamation of 2018. Metro Cebu’s retail sector Area. Retail demand is primarily remains mainly comprised of development that will include a as one of its major generated from the local workforce neighborhood malls and and business travelers. Robinsons components. Ayala Malls Gatewalk commercial strips. However, it Cybergate and Robinsons Fuente, presently boasts of 3 regional Central will add 115,000 square along the Fuente Osmena Circle, shopping centers, with a combined meters of mall GLA to Metro Cebu’s likewise commanded rents from GLA of approximately 850,000 present retail supply. The Landmark PhP1,000 per square meter per square meters. Department Store, month to PhP1,200 per square meter per month. The large number of visiting guests staying in various hotels and local residents in the Central Bloc One area created a strong retail Source: Cebu Holdings demand. The lease rates of and SM Seaside, which are located in other parts of Cebu City, started from PhP800 per square meter per month and went as high as PhP1,000 per square meter per month. Moreover, the average lease rates of shopping malls in Mandaue City ranged from PhP800 per square meter per month to PhP900 per square meter per month.

VACANCY RATES Robinsons Galleria Cebu had the highest vacancy rate among all the UPCOMING MALLS with known branches in Ayala Metro Cebu shopping malls at Metro Cebu anticipates the opening Center (Makati), Trinoma (Quezon 11.74% in the second half of 2018. Nevertheless, it has the largest of additional shopping malls in 2019 City) and Festival Mall (Alabang), will number of interesting upcoming serve as the mall’s main anchor. and the coming years. A new brands, comprised of restaurants shopping haven is set to rise in the LEASE RATES and eyewear shops such as Savory, heart of IT Park this 2019. The Max’s, Wingers Unlimited, Sunnies Ayala Malls Central Bloc will have The lease rates of Ayala Center Studios and Sarabia Optical, five floors of retail space complete Cebu and SM City Cebu were foreseen to draw mall goers and with an indoor activity center, a among the highest of the Metro subsequently attract additional mall tenants. supermarket, four cinemas, and Cebu shopping malls, ranging from various food choices. The features PhP1,000 per square meter per , which came in and layout of the mall are similar to month to PhP1,200 per square second in terms of vacant spaces, the Ayala Malls in Manila. Ayala meter per month. Both malls Malls Central Bloc will be adding displayed the highest foot traffic in 45,000 square meters of leasable Cebu due to their strategic location To be continued on page 12 space to the retail portfolio of Cebu and variety of brands available.

Page 8 NEW DEVELOPMENTS TO SUSTAIN THE GROWING CEBU INDUSTRIAL SECTOR

Industrial | Developers seek new opportunities by operating industrial hubs

General Milling Corporation

The Philippine economy posted a 247 locators. 43,133.46 square Priland Development Corporation 6.1% growth as of the fourth meters of Standard Factory Building plans to diversify its real estate quarter of 2018. The industrial space are available for lease in portfolio and develop a 42-hectare sector contributed 34.8% to the these economic zones as of the property in , Cebu into country’s GDP. Under the sector, end of 2018. an industrial park. The project will manufacturing grew by 3.2% year- house factories, warehouses for on-year, with food manufactures as Due to the limited number of lease and lots for sale. the main contributor, growing 4.3%. available spaces in Metro Cebu, CentralHub Industrial Centers, Inc. Cebu is recognized as one of the asking rents of industrial properties (CICI), a subsidiary of major producers of goods in the outside economic zones increased DoubleDragon Properties, country. Cebu is known for from a maximum of Php250 per announced the construction of its industrial parts assembly, food square meter per month in the 1st 3rd industrial hub in Cebu. Future processing, and manufacturing of half of 2018 to a ceiling of PhP700 sites previously identified include furniture, stonecraft, garments, per square meter per month in the CentralHub Cebu and CentralHub fashion accessories, electronics, 2nd half of 2018. Iloilo. The newest location will have camera and camera paraphernalia, an initial area of 5.2 hectares and gifts and housewares (GTH), In addition, the short supply of 27,212 square meters of industrial electrical equipment manufacturing, leasable industrial space has urged warehouse capacity. coal, and dolomite mining. property developers to invest in the Metro Cebu contains 12% of the development of industrial hubs. Philippine Economic Zone Authority’s operating economic zones in the country. It has one agro-industrial economic zone, thirty-five IT Parks and Centers, seven manufacturing economic zone, and two tourism economic zones. Cebu Light Industrial Park, and Mactan Economic Zones 1 and 2 are three of the major economic zones located in Lapu-Lapu City. They have a combined total area of 253 hectares and currently houses

CentralHub Source: DoubleDragon Properties

Page 9 7 CEBU HOSPITALITY SECTOR ENHANCED BY BOOM IN THE LOCAL TOURISM INDUSTRY Hospitality | Rising guest arrivals created significant demand for lodging and accommodation

In the full year of 2018, Central FIGURE 8 recorded a 16% year-on- CV Distribution of Tourists in 2018 year growth in visitor arrivals. The region welcomed roughly over 8 Million guests compared to 2017’s 2% 6.9 Million local and foreign guests. Introduction of additional Negros direct flights and increase in Oriental overall passenger capacity were 11% results of the opening of the Cebu Mactan International Airport in July Bohol and the Bohol-Panglao 18% International Airport in November. The extensive marketing efforts put forth by the country’s Cebu Department of Tourism (DOT) and 69% other independent organizations are likewise considered factors to the rise in visitor arrivals.

The Province of Cebu contributed Source: Santos Knight Frank Research 77% of the foreign guests that arrived in in 2018. Cebu is well-known for festivities such as the Festival, religious tourist areas such as the Simala Shrine and Basilica Minore Del Sto. Niño, dive spots such as and historical sites such as the Magellan’s Cross. Cebu’s visitor arrivals amounting to 2,805,115 guests is a far outcry from Bohol’s 646,082, ’s 116,310 and Siquijor’s 66,738. Cebu Province likewise led in terms of domestic visitor arrivals, accounting for roughly 62%, equivalent to 2,770,781 Basilica Minore del Santo Niño Magellan’s Cross visitor arrivals, of the local travelers that entered the region. The rest 45% in 2018, increasing from Central Visayas. A combined total of of the Central Visayas provinces 429,306 visitor arrivals in 2017 to 4,276,680 visitor arrivals were noted collectively comprised the 621,993 visitor arrivals in 2018. in the 2 cities. Lapu-Lapu had a larger remaining 38% or 1,685,270 Other notable visitor arrivals were ratio of foreign to local travelers at visitor arrivals. from Japan, US and Taiwan. 7:2, which is in contrast to Cebu’s 1 foreigner for every 2 local guests. Cebu international visitor arrivals The cities of Cebu and Lapu-Lapu remained dominated by South placed first and second, DOT forecasts an influx of 8.2 million Koreans, with 1,344,154 arrivals respectively, in terms of foreign foreign visitors in the in in 2018. Chinese arrivals rose and local visitor arrivals in 2019, with approximately 800,000

Page 10 8 New Fortune Garden Hotel Bai Hotel Cebu Resort’s Beachfront FIGURE 9 Foreign Tourist Arrivals in CV

Other Nations South 25% Korea Taiwan 37% 2% US 6% Japan 13% China 17% coming from Japan. Various airlines A huge supply of hotels and other recognized the growing volume of forms of accommodation cater to Source: Santos Knight Frank Research passenger demand and proposed the demand originating from the strategies to take advantage of the tourism boom in Metro Cebu. Cebu foreseen business opportunities. has a wide variety of FIGURE 10 accommodations available, from Metro Cebu Room Average Cebu Pacific, a Philippine-based budget-friendly inns and taverns, Daily Rate (PhP) budget airline, maps additional luxurious 5-Star hotels and relaxing international routes from Cebu to resorts with access to the Mactan 18,000.00 Japan and vice versa, considering beaches. With more than 12,000 16,000.00 the 1.1 million passenger volume accommodation rooms spread reported in 2018. The airline 14,000.00 across the cities of Cebu, Mandaue presently offers flights to 21 12,000.00 and Lapu-Lapu, Metro Cebu prides domestic and 5 international itself of being a major player in the 10,000.00 destinations from Cebu that country’s hospitality market. 8,000.00 includes Narita. 6,000.00 Overall weighted Average Daily Philippine Airlines, the country’s flag 4,000.00 Rates (ADR) in Cebu and Mandaue carrier, plans to expand Cebu 2,000.00 ranged from PhP3,300 to PhP3,900 operations by increasing the across all room types. The ADR of 0.00 frequency of its Cebu–Nagoya route standard rooms was more than from 4 flights per week to daily PhP1,500 while the ADR of suite schedules. rooms averaged from PhP4,600 to Air Asia Philippines, another PhP7,100. Cebu Mandaue Lapu-Lapu Philippine-based budget airline, is Hotel rooms in Lapu-Lapu Source: Santos Knight Frank Research launching Cebu–Macau direct commanded a higher tariff, with an flights in February 2019 as part of ADR of more than PhP9,500. the company’s long-term expansion FIGURE 11 Standard rooms in Lapu-Lapu had plan of promoting Cebu as an Metro Cebu 5-Star Average an ADR of more than PhP3,300 important hub for tourism and Daily Rate (PhP) while the ADR of suite rooms was business. pegged at PhP15,400.

25,000.00 HOSPITALITY SECTOR’S HEYDAY In Cebu City, deluxe and suite rooms of 5-Star hotels had a 20,000.00 Metro Cebu’s hospitality sector targets vacationing tourists and weighted ADR of PhP3,600 and 15,000.00 participants of Meetings, Incentives, PhP6,700, respectively. In Lapu- Lapu, however, deluxe and suite 10,000.00 Conventions and Exhibitions/Events (MICE). In October, a 90s boyband rooms reached a weighted ADR of 5,000.00 held its 20th Anniversary “Reunion” PhP10,100 and PhP20,000, respectively. 0.00 Tour Concert in Waterfront Cebu Deluxe Suite City Hotel & Casino. In November, the Asian Carriers Conference 2018 Cebu Lapu-Lapu was held at Shangri-La Mactan To be continued on page 12 Source: Santos Knight Frank Research Resort and Spa.

Page 11 Continued from Residential… Continued from Retail… Continued from Hospitality…

Mactan Newtown, Megaworld had a vacancy rate of 4.18%, less UPCOMING HOTEL SUPPLY Corporation’s first major than half of Robinsons Galleria development outside Metro Manila, Cebu’s vacancy rate. The hospitality sector in Cebu will carries a “LIVE-WORK-PLAY- Metro Supermarket, which suffered continue to expand as local and LEARN and BEACH” concept. a devastating fire during the early international hotel brands are Aside from offices, hotel, lifestyle months of 2018, is scheduled to constantly introduced across the mall, and educational institution, reopen on the first month of 2019. Metro. Brgy. Punta Engaño in Lapu- residents can also enjoy the Metro Retail Stores Group, Inc. Lapu , where a number of resorts development’s exclusive (MRSGI) plans to initially open the are located, is set to see another beachfront. 8 Newtown Boulevard, supermarket and targets the 1,600 rooms within the next 5 reopening of the rest of Metro Ayala One Manchester Place, and One years. Some of the upcoming hotels Cebu by mid-2019. Pacific Residence are high-end in the area include Dusit Thani condominiums that form the NOTABLE EXISTING BRANDS AND Mactan, owned by Robinsons Land residential component of the PLANNED EXPANSIONS and managed by Dusit Hotels & township. Resorts, Udenna Development’s The Cebuanos continued to Emerald Resort and Casino, support homegrown brands while To address the rising demand for Sheraton Cebu Mactan Resort by residential units in the area, foreign guests wished to try out Cebu original brands and products. Apple One Properties and Rockwell Megaworld Corporation recently Supplying the region's caffeine fix is Land’s Aruga Resorts and introduced another high-end tower Bo’s Coffee, founded in 1996 by a Residences Cebu. in Mactan Newton. La Victoria Cebu local, Steve Benitez. It now Global Residences was inspired by has over 100 branches all over the Megaworld’s Mactan Newtown is the Spanish Galleon that Ferdinand country, mostly in Visayas and scheduled to open more than 500 Magellan used to circumnavigate . Bo’s Coffee imports rooms, with the launching of Savoy the earth. The 20-storey tower will coffee beans from Sagada, Hotel Mactan Newtown within offer 181 units of varying cuts, Benguet, Mt. Kitanglad, Mt. 2019. Another 550 additional rooms starting from studio to three- Matutum, and Mt. Apo. The brand are anticipated in the next 2 years is common in Cebu shopping with the unveiling of Mactan bedroom units. centers to the point of having more Belmont Luxury Hotel. City di Mare is a notable existing than 1 store in a single shopping mall. township located along South Road In addition, Cebu City will be Properties in Cebu City and is the Another brand with a well- embracing its own ring of hotels in first township developed by Filinvest established presence in Cebu is various parts of the city, including in the Visayan Region. This 50- Bubble Tea Station. It was founded the Holiday Inn Cebu hectare coastal township includes by a Cebuana, Meyan Lim Young. (InterContinental and Erawan existing residential towers, an Bubble Tea Station has stalls in Groups) and Minore Centre & Hotel upcoming shopping mall and lined- Robinsons Galleria Cebu, SM City (Duros Land Properties) in CBP, Cebu, and SM Seaside City. The Dusit Princess Cebu and Sun Park up office buildings. Two multi-tower remarkable Milk Tea phenomenon Royal Hotel in the North residential projects are selling in City has extended to Cebu with di Mare at present. Sanremo Oasis numerous store launches in various Reclamation Area and Citadines is a midrise condominium complex shopping malls. Cebu (Cebu Landmasters Inc.) in offering studio and two-bedroom the Fuente Osmeña area. units. Amalfi Oasis, on the other It is likewise common for popular brands in Manila to expand to Moreover, Mandaue will be hand, sells fewer units per floor and Metro Cebu and experience the welcoming a well-known hotel larger unit cuts in order to target same level of popularity, brand inside the Astra Centre. high-end buyers. acceptance and patronization from Radisson Red, operated by the the local and foreign market. After Radisson Hotel Group, is set to Mandani Bay is another much- the good public reception when it open its doors in 2021 with 146 awaited mixed-use project in Metro was launched in Manila last August Cebu. It is a joint venture project of of 2018, Sunnies Face, the rooms. The brand marketing is Hong Kong Land and Taft cosmetics line of Sunnies Studios directed towards the millennial Properties, Inc. in the North and Specs, is opening two market. Reclamation Area of Mandaue. The branches in Cebu. One will be in development is already on its Ayala Center Cebu and the other second phase. Mandani Bay Quay store will be in SM City Cebu. cluster, which is composed of 3 residential buildings and an office tower, commenced construction in 2018. Page 12 Manila Office MANAGEMENT 10th Floor, Ayala Tower One & Exchange Plaza Ayala Avenue, Makati City, 1226 Rick Santos t: (632) 752-2580 / 848-7388 Chairman and CEO +63 917 528 3687 f: (632) 752-2571 [email protected] w: www.santos.knightfrank.ph OCCUPIER SERVICES AND COMMERCIAL AGENCY

Cebu Office Joey Radovan Suite No. 30, Regus Business Center Vice Chairman 11th Floor, AppleOne Equicom Tower +63 920 906 7517 [email protected] Mindanao Avenue corner Biliran Road Cebu Business Park, Cebu City 6000 INVESTMENTS AND CAPITAL MARKETS t: (6332) 318-0070 / 236-0462 Calvin Javiniar Senior Director +63 917 574 3058 [email protected]

VALUATIONS

Mabel Luna Director +63 917 865 3712 RESEARCH & CONSULTANCY [email protected]

Jan Custodio RESIDENTIAL SERVICES Senior Director +63 917 574 3572 Kim Sanchez [email protected] Associate Director +63 917 537 9650 Pai Javillonar Gelo Manansala [email protected] Research Manager Research Analyst [email protected] [email protected] PROPERTY MANAGEMENT

Rhys Revecho Ivy Ohoy Ed Macalintal Research Analyst Research Analyst Associate Director [email protected] [email protected] +63 917 533 7750 [email protected] Maki Takagaki Shai Retuya Research Analyst Research Analyst PROJECT MANAGEMENT [email protected] [email protected] Allan Napoles Managing Director Santos Knight Frank Research provides strategic advice, consultancy services and forecasting to a +63 917 5277638 wide range of clients worldwide including developers, investors, funding organizations, corporate [email protected] institutions and the public sector. All our clients recognize the need for expert independent advice FACILITIES MANAGEMENT customized to their specific needs. Dennis Nolasco Senior Director RECENT MARKET-LEADING RESEARCH PUBLICATIONS +63 917 5535646 [email protected]

TECHNICAL SERVICES AND ENGINEERING

Nelson Del Mundo Vice President +63 917 5743046 [email protected]

Metro Manila Metro Cebu Active Capital The Wealth Report Market Update Market Update 2018 2018 Q4 2018 1H 2018

Santos Knight Frank Research Reports are available at santos.knightfrank.ph/research

© Santos Knight Frank 2019 This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Santos Knight Frank for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Santos Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Santos Knight Frank to the form and content within which it appears. Santos Knight Frank is a long-term franchise partnership registered in the Philippines with registered number A199818549. Our registered office is 10/F Ayala Tower One, Ayala Ave., Makati City where you may look at a list of members’ names.

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