KMC Research

Cebu Office Briefing 4Q 2020 | Office Briefing

Cebu Business Districts Future Stock (2024) MAP 1 OAKRIDGE BUSINESS PARK CEBU IT PARK NORKIS CITY CYBERPARK LAPU-LAPU CITY CORDOVA CEBU BUSINESS PARK

CEBU ABOITIZ - AYALA DOWNTOWN BUSINESS PARK AREA NORTH MACTAN NEWTOWN RECLAMATION AREA

SM - AYALA SOUTH JOINT VENTURE ROAD PROPERTIES SM SEASIDE CITY CEBU COMPLEX

CITY DI MARE

505,623.0 sq m 437,499.1 sq m 362,640.8 sq m CEBU IT PARK CEBU FRINGE

Source: KMC Savills Research DEVELOPMENT PIPELINE (2021-2024) CURRENT STOCK

TABLE 1 Key Figures - Grade A Office Cebu Business Cebu IT Cebu 4Q 2020 Unit Cebu Park Park Fringe

PHP/sq m 580.8 619.7 513.7 577.4 Average net rental rate USD/sq ft 1.12 1.19 0.99 1.11

PHP/sq m 650.0 700.0 550.0 700.0 Upper net rental rate USD/sq ft 1.25 1.35 1.06 1.35

Vacancy rate (%) % 15.5% 23.6% 16.6% 15.1%

Current stock (sq m) sq m 380,339.1 378,280.0 272,884.1 1,031,503.2

Development pipeline sq m 57,160.0 127,343.0 89,756.7 274,259.7 2021-2024 (sq m)

Source: KMC Savills Research

2 4Q 2020

Cebu

GRAPH 1 GRAPH 2 Stock & Vacancy Supply & Take-up

Cebu Grade A Office Supply Cebu Grade A Office Stock Cebu Grade A Office Take-up Cebu Grade A Office Vacancy Rate 160 1,500 25%

120 1,200 20%

80 900 15%

40 '000 sq m (GLA)

'000 sq m (GLA) 600 10% 0

300 5% -40

0 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F -80 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F

Source: KMC Savills Research Source: KMC Savills Research

GRAPH 3 GRAPH 4 Rental Performance Development Pipeline by District

Cebu Fringe Cebu Rental Growth, YoY Cebu Business Park Cebu Grade A Office Rental Index Cebu IT Park 160 30% 160

140 20%

120 120 10%

100 0% 80 1Q 2009 = 100 80 -10% '000 sq m (GLA)

60 -20% 40

40 -30%

1Q20093Q20091Q20103Q20101Q20113Q20111Q20123Q20121Q20133Q20131Q20143Q20141Q20153Q20151Q20163Q20161Q20173Q20171Q20183Q20181Q20193Q20191Q20203Q2020 0 2020 2021F 2022F 2023F 2024F

Source: KMC Savills Research Source: KMC Savills Research

MARKET IN MINUTES

■ Overall vacancy in Cebu increased during the quarter and finished the year at an all-time high of 18.8%. All submarkets continued their slide from the previous quarter, with Cebu Business Park (CBP) and Cebu Fringe recording 8,300 sq m and 2,200 sq m of office space vacated, respectively. The biggest loser for the quarter was Cebu IT Park (CITP) which registered 89,200 sq m of vacant office space. Due to low demand from the opening of Central Bloc Tower 2, vacancy rates in the area grew to 23.6% in 4Q/2020.

■ Declines were seen across the board as landlords coped with the increased competition from recent vacancies and upcoming releases. CBP rents took the hardest hit, reversing its 2019 gains with a 3.3% drop YoY. This brought average rents in Cebu a 1.3% quarterly decrease at PHP 577.4 per sq m / month, dropping by 2.3% in 2020. We forecast rental rates to continue its downward trend as the market deals with the new supply in the coming months.

■ Around 149,800 sq m of fresh Grade A office supply is expected to come online in 2021. Demand is foreseen to remain muted due to weak leasing activity. As of year-end, more than 95% of this scheduled new inventory is still available in the market. This surplus may continue in the long term as Cebu deals with the effects of the pandemic.

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