SANTOS - KNIGHT FRANK - Connecting People & Property, Perfectly

Cebu office market to see unprecedented supply growth in
the next 3 years

• 47% growth in office supply seen between 2018 and 2020
• BPO industry remains a key driver of demand for office space in Cebu
• New airport terminal to sustain Cebu’s growth momentum
• Cebu’s residential real estate is a hot market for East Asian buyers

Metro Cebu’s real estate market will see a leap in office stock with as much
as 350,000 sqm (gross leasable area) set to open between 2018 and 2020. Representing
47% of the existing supply in Cebu, the growth reveals the long-term positive outlook of
developers amid healthy demand for office space by multinational companies and BPO
firms, says leading real estate service provider Santos Knight Frank.

During the first half of the year, Cebu continued to see new investments enter its booming
property sector, driven a strong local economy, presence of skilled labor force, affordable
office lease rates and enhanced international connectivity with the launch of Mactan-Cebu
International Airport’s Terminal 2.

Rick Santos, Chairman & CEO of Santos Knight Frank comments: “The growth of Cebu’s
property sector this year solidifies the metropolis’ position as the leading investment
destination in the Philippines outside Metro Manila. With a strong economy, large pool of
talent and new infrastructure in place, Cebu is well on its way to becoming a global city.”
Santos continues: “The launch of Mactan-Cebu International Airport’s Terminal 2 is a
particularly exciting development. While a number of cross-border transactions have recently
been closed in Cebu, in particular from China, South Korea and Japan, the improvements to
the airport will further increase tourism, facilitate greater inflow of capital and help continue
the metropolis’ growth momentum in the coming years.”

In the office market, weighted average asking lease rates increased by about 2% to
PHP548.31 during 1H 2018 from PHP536.96 in 2H 2017. Done deals tracked by Santos
Knight Frank were recorded with transacted rents of PHP 600 to 650 per square meter – a
9% increase from last year’s transacted rents. Meanwhile, office capital values typically
range from PHP 150,000 to 200,000 per square meter.

Joey Radovan, Vice Chairman and Head of Occupier Services & Commercial Agency
at Santos Knight Frank reveals: “By 2020, the greater Cebu business districts will have
close to 1 million sqm of total space serving the office market. The IT-BPO industry will
continue to drive commercial demand and traditional office operations will have the
opportunity to upgrade to new, modern buildings for their front office needs.”

(Key Properties and Offices managed in Cebu)

Residential demand

Prices across the residential real estate market have increased during 1H 2018 year-onyear.
The affordable sector grew by 14.5%, midscale by 12.0% and high-end sector by
12.0%.

Buyers mostly consist of investors motivated by capital appreciation and leasing
opportunities. A large volume of availed inventory was intended for employee housing of
Chinese gaming companies. With the traffic congestion in the city, residential demand is also
seen in city centers which are closer to offices. Buyers from South Korea, Japan and China
– three of the top sources of foreign arrivals in Cebu – are reported to purchase bulk
condominium units.

Tourism and hospitality

Cebu’s international visitor arrivals grew by 14% in 2017. Of the 4.9 million visitors who
arrived last year, 54% were foreign guests. South Korea led the list of top sources of tourists,
comprising 41.2% of foreign arrivals, followed by Japan (20.1%) and China (10.5%).
To support the influx of tourists, Cebu developers have partnered with international hotel
operators to bring in leading brands such as Sheraton with AppleOne Mactan; Dusit Thani
Mactan Cebu with Robinsons Land Corporation; Dusit Princess Cebu with Grand Land, Inc.
and Citadines Cebu City and lyf Cebu City with Cebu Landmasters. Homegrown hotel
brands such as Seda of Ayala Land Hotels and Resorts Corp. and Aruga of Rockwell are
also in the pipeline.

A rising gaming destination, Metro Cebu will soon see integrated resort projects such as
Emerald Resort and Casino of Udenna Development Corp. in Lapu-Lapu City, Pan-Asia
Millennium Hotel and Resort’s Inc.’s casino resort in Mandaue City and the Gokongweiowned,
Universal Hotels and Resorts, Inc.’s Isla dela Victoria in Cebu’s South Road
Properties generate more arrivals in Cebu.

Emerging cities in Visayas

Migration to Cebu from other Visayas provinces has been key in driving demand across all
real estate sectors. As the Cebu real estate market continues to grow, other real estate
market players are setting up in the fringes of the city and other areas within the Visayas
region, building more competition and facilitating growth in secondary areas. With the
presence of employment opportunities in other provinces of Visayas, it is possible for the
Cebu migration to decrease.

Iloilo and Bacolod are two destinations exhibiting increasing commercial and development
activities, particularly the Iloilo Business Park, Bacolod Capital Corporate Center and
Bacolod Capital Central Mall.

For inquiries, Contact:

Rick Santos

Chairman & CEO

rick.santos@santos.knightfrank.ph

Manila Head Office:

10F Ayala Tower One & Exchange Plaza, Ayala Triangle, Ayala Ave., Makati 1226

T (+632) 752-2580

Cebu Office:

Suite No. 30, Regus Business Center. 11F AppleOne Equicom Tower, Mindanao Ave. corner Biliran Road, Cebu Business Park, Cebu City 6000

T (+6332) 318-0070 / 236-0462