Delta upends office recovery

By Jenina P. Ibañez, Reporter

A RECOVERY in office space demand will likely be delayed to late 2022, amid on-going uncertainty over new variants of the coronavirus disease 2019 (COVID-19), experts said.

Real estate services firms are anticipating that employers will keep remote work options until enough Filipinos are fully vaccinated against COVID-19.

JLL Philippines Head of Research and Consultancy Janlo de los Reyes said that the company has kept its subdued projection for office demand until the end of 2021. But he noted that longer term recovery could slide from early next year to the latter half of 2022, depending on market developments in the next few months.

“We anticipate return-to-office timelines to be deferred and have seen more organizations taking position on remote work arrangement either indefinitely or in the interim,” he said in an e-mail.

“Key factors that we expect to influence return-to-office timelines are vaccine development and rollout, government policies, new processes and protocols, technology, and new levels of risk acceptance/tolerance by companies and employees.”

He noted mixed responses among organizations when it comes to the future of work arrangements, noting that the companies’ stance will likely be fluid.

COVID-19 cases in the Philippines have been surging as the more contagious Delta variant spreads, prompting strict lockdowns, especially in the capital region.

Claro dG. Cordero, Jr., director and head of research at Cushman & Wakefield, said in an e-mail that mid- to late-2022 could signal recovery for the office segment if the Delta variant represents the final or most virulent mutation of COVID-19.

“The rate at which the current inoculation program is being implemented will be the foremost consideration, as the achievement of herd immunity can increase the level of optimism and consumer activity,” he said in an e-mail.

“The availability and safety of mass transit arrangements is also an important consideration for the decision of most companies and employees to return to the office.”

Some firms have already taken the recent strict lockdowns in Metro Manila into account in coming up with the 2021 projection.

Colliers Philippines Senior Research Manager Joey Roi H. Bondoc said the company will not make significant changes in its office space report as it already factored in lockdown restrictions in its reports.

“We already factored in the possibility that it will be a slower demand starting second quarter or could extend to even third quarter because of the lockdown,” he said in a phone interview.

A Colliers report said office market recovery will be based on vaccination progress, with outsourcing and traditional firms continuing to lead new office space absorption. It projects rental recovery to start in 2022 after a projected 20% drop this year.

The Philippines has fully vaccinated just over 13% of its population, the Johns Hopkins University COVID-19 tracker showed.

Lobien Realty Group in an e-mail said that companies will continue to use hybrid work measures — or mixed home and office-based work — while there is still no herd immunity in the country.

“We need the vaccination efforts to be successfully implemented at the fastest possible time as this is the most important ingredient for our economic recovery,” the company said.

But Cushman & Wakefield’s Mr. Cordero said hybrid work arrangements will still be the norm post-pandemic.

“The pandemic has shown that there are functions that may just as well be effective, even when done remotely. Another consideration is that hybrid workplaces is a cost-effective strategy for corporate occupiers, which may have to allocate higher spend to content with health and safety regulations in their physical workspaces,” he said.