Leechiu Property Consultants (LPC) said office leasing in the first five months of the year reached 211,000 square meters (sq.m.), just 23 percent of the 885,000 sq.m. transactions closed in the Philippines in the first half of last year.
This according to LPC is proof enough of the resilient office leasing market in the Philippines despite the lockdown in the latter part of March and most of the second quarter of the year.
“We expected zero demand in the second quarter of 2020 but despite the ECQ/MECQ (enhanced community quarantine/modified enhanced community quarantine), we’ve seen transactions concluded. Philippines is most likely the only office market in the world that is still growing in demand today,” said David Leechiu, LPC chief executive officer.
“We also expect IT-BPM (information technology-business process management) demand to surge once more by yearend when both the Philippines, US and other countries would have adopted to a new normal,” Leechiu added.
Metro Manila comprised 60 percent of the total transactions so far this year, while the rest are distributed around the country.
The IT-BPM posted the strongest demand for the period, comprising 37 percent of the total, followed by Philippine offshore gaming operators (POGO) at 13 percent, while the rest is divided among the traditional offices, corporate tenants and flexible workspaces, to name a few.
Leechiu expressed confidence that demand from the IT-BPM sector would remain.
He recalled that during the 2008 Global Financial Crisis, the Philippines was the only market in the world where office demand did not contract owing to expansions from this sector.
“Office demand from the IT-BPM sector has been stable and growing modestly throughout the decade,” he said.
LPC expects POGOs to make a comeback by the end of June and further drive demand. A Bureau of Internal Revenue (BIR) memorandum issued last May required POGOs to discontinue operations until they have settled their taxes and secured BIR clearance.
Leechiu forecasted that most, if not all, POGOs would be 30-50 percent operational by end-June, following a compromise agreement between the BIR and POGOs.
“As soon as travel restrictions are lifted, we are optimistic that POGOs will be back to full capacity, and will start revisiting their expansion plans,” said Leechiu.
Many firms with operations in China meanwhile are also likely to shift their customer service operations to the Philippines, Leechiu said, “importing talent from China to operate from the Philippines following the POGO operating model.”
These developments will keep the office property market buoyant and at the same time provide sources of revenue for the Philippine government, he added.
Meanwhile, Leechiu said new office stock would be less than initially projected with the limit on construction activities.
While construction has already resumed in current office projects, he said work capacity may still be at 50 percent owing to the imposition of social distancing and the deployment only of a skeleton workforce.