BEFORE the coronavirus outbreak escalated, Cebu was projected to add more office space supply in 2020 at a time when economic optimism pointed to continued business expansions.
But the industry is changing course now, a latest sign that the commercial real estate business is taking a major blow from the pandemic-induced economic fallout.
Developers are holding off expansion plans. Office locators are taking a wait-and-see stance.
"Plans to occupy new office or expand are likely to be shelved for three to six months," said Joey Bondoc, senior research manager at Colliers International Philippines.
Cebu's new office supply is now projected to drop by 15 to 20 percent to about 29,000 to 39,000 square-meters.
"Yes, we are likely to see a lower supply compared to our initial forecast. Initially, we projected a take-up of about 130,000 square meters for Cebu in 2020. But we see this dropping due to softer leasing inspection and deals," he told VoxPop Cebu.
The impact on vacancy is likely to be captured starting the second quarter of 2020, Colliers said.
"Similar to what we see in Metro Manila, companies have been holding off expansion. They are now exploring if they are to continue with their expansion plans. But for the majority of the locators, companies are taking a wait-and-see stance," he said.
The office sector's recovery will largely depend on how soon the virus outbreak will be contained.
"If the lockdown measures bear fruit starting in the third quarter, we might see firms to again consider their leasing options. During the global financial crisis from 2008 to 2009, it took business process management firms about six to nine months after the crisis to start occupying new space," Bondoc said.
The vacancy for Cebu's office industry is likely to be tempered by lower supply.
Depending on the recovery of market sentiment, companies might start with their office leasing queries by the second half of 2020.
But the actual occupancy of office space might happen in 2021, according to Colliers.
Demand for co-working space
"Flexible or co-working space demand might spike in the near term especially from companies trying to pause long-term deals. Taking up a few seats might be the viable option while they are firming up their long-term leasing deals after the pandemic," the analyst said.
Moving forward, Colliers sees the popularity of flex and core or split operations, where office take-up equally splits between traditional and flexible workspace.
"More office developers and occupiers will be strict with property management procedures. We see greater emphasis on sanitation," he said.
Online ESL in demand
Online English as a Second Language (ESL) schools are also expected to boost demand amid the travel restrictions.
Previously, students from China and Korea came to Cebu to undergo an intensive ESL training. Now, the online training is likely to be expanded, hence more ESL tutors are likely to be hired and this should result in a greater take-up of office space, Colliers said.
