Leechiu Property Consultants (LPC) is confident the resurgence of the information technology and business process management (IT-BPM) industry will mean the recovery of the property market’s office segment.
David Leechiu, LPC chief executive officer, said despite the exodus of the office space’s darling, the Philippine offshore gaming operation (POGO), owing to the changing business environment starting the second quarter, the sector accounted for nearly half of the 381,000 square meters (sq.m.) takeup for the year, at 182,000 sq.m.
“Sixty-nine percent of the demand was in Metro Manila and the balance of 31 percent mostly in the cities of Iloilo and Cebu. Moreover, pipeline demand for 2021 or total live requirements is estimated at 300,000 sq.m.,” Leechiu said.
At present, POGOs have vacated 277,000 sq.m. in office spaces for the year, equivalent to 51 percent of the 540,000 sq.m. of office space vacated for the period. Around 179,000 sq.m. were from other players struggling to recover from losses from the new coronavirus disease 2019, about 33 percent of total.
LPC estimated rent losses due to recent POGO vacancies at P1.4 billion for the period, mostly located in Makati, Quezon City and the Ortigas-Mandaluyong area.
Leechiu, however, said at least 56 percent of these vacated spaces can be filled up in the next 12 months by expanding IT-BPM firms since these spaces are accredited by the Philippine Economic Zone Authority (PEZA) and eligible for tax incentives.
“Moreover, 82 percent of the aforementioned spaces are in Metro Manila, a primary destination for BPO (business process outsourcing) firms,” he said.
“Developments in the last two quarters have created compelling opportunities for IT-BPM players. We are thus confident they will continue expanding in the country which remains a leading outsourcing arena for global businesses now seeking to cut costs and recover from COVID losses,” he added.
According to Leechiu, new IT-BPM friendly centers like Iloilo City are attracting more outsourcing firms. This year, Iloilo accounted for the largest share of new office transactions outside of Metro Manila at 50,000 sq.m., overtaking Cebu City which posted 37,000 sq.m. new leases.
“Until this year, Cebu was the second most popular BPO expansion area,” he said.
Of the 507,000 sq.m. in new office space added this year, about 174,000 sq.m. are PEZA-accredited. Net of pre-committed spaces, Leechiu said PEZA vacancy will continue to be tight in the Philippines, and rent in these areas is expected to grow since demand will outpace supply in the next five years.
This trend is what keeps rent in key districts like Makati, Bonifacio Global City and Ortigas steady despite the challenging environment, according to Leechiu, while warning that if POGO exodus continues, areas such as the Bay area, Quezon City and Alabang may experience a slowdown.
“We have every confidence that the rollout of the vaccine in 2021 will create unprecedented market euphoria that will dramatically benefit the real estate industry. A confluence of factors – from record-low, long-term interest rates, to the country’s fantastic fiscal fundamentals that have resulted in good credit ratings, to newfound mobility and tourism opportunities from a massive injection of infrastructure projects – will ensure that,” said Leechiu.