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Southern Boomtown

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[Photo of The Queen City of the South]The hottest real estate investments will always be where the jobs are —unless you’ve maxed out the space.

That’s the reality places like Makati and Ortigas have to deal with; which spells red-hot opportunity for places like Cebu, where the quality of labor is very high, but occupancy still isn’t.

Journalist and Bloomberg board member Jane Quinn said it best, “The best real-estate investments with the highest yields are in working-class neighborhoods, because fancy properties are overpriced.”

A Philippine CBD may not be exactly the same thing as an American working-class neighborhood, but the idea is the same: Go where the job market is.

That’s what CB Richard Ellis execs, headed by CEO Rick Santos, said at a recent press briefing. “Labor in the Philippines is still quite abundant. Some companies are moving out of India into the Philippines,” according to Santos. Unsurprisingly, most of these companies are from the business process outsourcing (BPO) industry. “BPO drives multinational locators to Cebu. They’re driven by people and capital,” Santos said.

Cebu’s skilled workforce is powered by more than 45 tertiary educational institutions, with an average college- and vocational-student population of 100,000 every year.

What’s more, Cebu City alone has at least 57 computer, technical, and agro-industrial schools that offer short-term courses. And this educated, skilled manpower is largely English-speaking.

The synergy of a skilled, English-speaking workforce plus lots of space to build, gives us a boomtown that has
the potential to attract the most conservative investor.

Factor into the equation steadily escalating tourist arrivals and you have an unbeatable source of profit.

Human, Capital Influx

Cebu-bound tourists reached 778,000 last year. By year end, the figure is expected to hit one million, the top five markets being Korea, Japan, US, Taiwan, and Hong Kong. Add that to the 2.7 million domestic visitors that visited the Queen City of the South (up from 2006’s 2.3 million) and you have a trend investors can’t ignore; particularly those from the retail and hotel industries.

The amazing multiplier effect of visitor arrivals and a skilled workforce is also seen in the large volume of other investments that have been pouring into Cebu and surrounding areas.

The RP Department of Trade and Industry figures for the region show steady growth in new businesses registered in the past five years — from 9,400 in 2002 to a couple hundred shy of 14,000 as of 2006.

The initial capital brought in by these new enterprises also increased, from around 8.6 billion pesos five years ago to a whopping 25.6 billion pesos in the succeeding three years.

Major Developments

[Photo of Graph]Recognizing the burgeoning consumer market of Southern Philippines, top retailers are eager to achieve a greater Cebu presence. Rustan’s Supermarket opened a second store in Ayala Center Cebu. Retail giant SM Supermalls, aside from expanding the north wing of SM City Cebu, is also studying prospective locations (65,000 to 70,000 sq m) for two more malls in Cebu.

Meanwhile, in a major development, Manila-based retailer Lucio Co’s Puregold Priceclub plans to convert the former Mactan site of Uniwide into a flea market-style (known locally as a tiangge) shopping area.

The major hotel brands aren’t far behind. Expected soon are five-star hotels Crown Regency, the 400-room Sofitel Cebu, the 668-room Imperial Palace Hotel and Resort, and the 700-room Hotel Towers Mactan.

Also anticipated are the completion of the 368-room Fuente Towers Complex, the Lancaster Suites Cebu (near the Mactan International Airport), the 300-room EGI Cebu Mactan Hotel, and the Eton Properties resuscitated Coral Reef Resort in Mactan.

“There are several growth districts in Metro Cebu that are now explored for development namely, Cebu Business Park, Asiatown IT Park, Banilad-Talamban District, Uptown and Downtown Cebu, North and South Reclamation Properties,” CB Richard Ellis Phils. general manager Trent Frankum revealed. “However, investors are now focusing on Cebu Business Park and Asiatown IT Park given the influx of BPO companies expanding from Manila.”

These expansions are, perhaps, more properly called explosions.

Just a couple of years ago, Lexmark Research & Development Corp. bought a site in Cebu Business Park. Today, its first building, an 8,000-square-meter office building and laboratory is 5% away from completion. The next building, a 23,000-square-meter office building, is on foundation work. Moreover, CB Richard Ellis execs disclosed that, for the last nine months of 2007 alone, they have several land-sales and office-lease transactions, both in Cebu Business Park and Asiatown IT Park, slated for completion.

Metro Cebu is indeed the most reasonable alternative to the space-starved CBDs of Metro Manila. So if you want a sizzling investment opportunity in the real estate market, follow the jobs — and the money.

print ed: 11/07


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