Investment Destinations Series: Cebu (Part 1 of 3)

One of the oldest cities in the Philippines, Cebu has a rich culture and history. It continues to be one of the most important destinations in the country, as it houses some of the most iconic heritage spots such as Magellan's Cross, Basilica del Santo Niño, and Fort San Pedro. It is also known for its colorful and lively festivals, Sinulog being the most popular especially among expatriates and foreigners who like night parties and electronic dance or pop music.  

Aside from being a top tourist hub, Cebu is also a fast rising investment destination, offering opportunities in various sectors in creative industries, small and medium enterprises (SMEs), and most importantly, information technology-business process outsourcing (IT-BPO). In fact, Cebu has been named as the 8th most important outsourcing destination in the world by foreign strategic advisory firm Tholons. As of 2013, this industry employs over 100,000 in Cebu alone, showing strong investor interest in the area.

Increased investor interest
Several firms have pursued investment projects in Cebu, including major real estate firms. Last year, Rockwell Land has completed its first regional development, 32 Sanson, which will be turned over by the first quarter of 2014. Another property magnate, Megaworld, has scaled up its 16.8-hectare beachfront property in Lapu-Lapu, Cebu to 28.8 hectares.

Cebu is also attracting global investors from Japan and US, specifically in the manufacturing sector. With the rising cost of space and labor in neighboring China and Vietnam, the Philippines has once again caught the eye of investors, thanks to our investor-friendly economic landscape. Investments in the province also came in the form of PPPs, such as the establishment of solar power system to create a cleaner environment and encourage utilization of renewable energy, improvement of the terminal building of Mactan Cebu International Airport, and the upcoming Metro Cebu Expressway project, which is already being conceptualized.

Opportunities in real estate: office market
Cebu currently enjoys a strong growth in the number of BPO entries -- in spite of having substantial supply last year, the vacancy rate still dropped due to high office space demand. As of the first half of 2013, Cebu's vacancy rate is at an average of 2.10%, though the Uptown/Osmeña Blvd. areas currently have an over 5.09% vacancy due to new supply. 

The high demand also contributed to the rise in rental prices. Cebu Business Park currently has an average rental rate of Php 475 per sqm. a month, which went up by 5.56% from last year. On the other hand, Cebu IT Park rates is at Php 500 per sqm. a month, which has increased by 8.1% from 2013.

Average rental rates, however, are higher for Grade A office space in Cebu, which is starts at Php 550, with a high of Php 650 per sqm.

Available stock in Cebu is expected to reach more than 220,000 sqms. by 2015.

Interested in investing in Cebu? Contact KMC Savills today for more information on investment opportunities in the Philippines.