Office Space Demand Escalates Driven by BPOs and E-commerce

An increase in demand for offices and residential properties has been observed despite the pause within the Philippine offshore gaming operator (Pogo) industry that was once the sector’s primary booster, according to Leechiu Property Consultants (LPC).

From the second quarter of 2020 to the first quarter of 2021, it was estimated that Pogos vacated a total of 396,000 square meters. This is due to a number of factors including the lockdown measures due to the pandemic, the crackdown by regulators in Mainland China, and changes in the pogo tax regime.

The total demand for office space in the country is expected to exceed 400,000 square meters this year, LPC believes, which is in line with the amount of space that Pogos vacated over the previous year. Total office demand reached 390,000 square meters in 2020.

The new demand for office space amounted to 109,000 square meters in the first quarter of 2021, equating to a 68% improvement compared to the 65,000 square meters seen in the third quarter of 2020, which was last year’s low point. This first quarter demand also suggests a 22% increase from the fourth quarter of 2020.

These are good signals that firms are finally “thinking long term and are preparing to go back to the office,” said LPC.

The business process outsourcing (BPO) industry took up the largest amount at 33,000 square meters in the first quarter of 2021. The e-commerce industry followed at 19,000 square meters, more than tripling its takeup from the fourth quarter of 2020. “E-commerce is proving to be a sunshine industry,” said LPC chief executive officer David Leechiu.

The BPO industry had also grown consistently over the previous year despite the ongoing pandemic, according to Mikko Barranda, LPC’s associate director.

There are office tenants in the market for 266,000 square meters of office space. Of those that fuel demand, 33% comes from BPOs, 12% comes from Pogos, and 7% is from retail firms.

“Despite the hardships the retail industry has experienced we are seeing companies adapt, innovate and commit to space in anticipation of a recovery,” Barranda said.

Landlords to Pogos suffered approximately 30% in losses while landlords to non-Pogos were significantly less at 12%. The rental rate impacts on landlords had been big, “but not as big as it could have been,” according to Leechiu.

“I think the Pogo situation will be resolved in that [recovery] should just be around the corner,” he added.

Bonifacio Global City had the most resilient office property segment in terms of rental. Leasing deals remained at ₱1,200 to ₱1,400 per square meter per month, Leechiu explained.

Source: Inquirer