TRADITIONAL offices and knowledge process outsourcing (KPO) providers are seen to sustain the demand for office spaces in 2019, although the delay of accreditations by the Philippine Economic Zone Authority continue to pose a threat on their expansion in the country.
This is according to the fourth quarter 2018 Property Market Report of real estate consultancy services firm Colliers International Philippines, which noted that 33% of total net take-up of 1.18 million sq.m. in 2018 came from traditional firms, government agencies, and flexible workspace operators.
Meanwhile, KPO providers accounted for 27% of the net take-up, or around 381,000 square meters (sq.m.).
“Colliers sees the KPO sector driving office demand in the next 12 months. KPOs provide higher-value outsourcing services such as health information management, software engineering, and finance and accounting,” according to Colliers’ report prepared by Research Manager Joey Roi H. Bondoc.
Among the KPO companies that occupied space during the fourth quarter of 2018 are Infosys and AECOM, joining the ranks of Amazon and Google which are already holding office in Metro Manila.
“The entry and expansion of Amazon and Google indicates that Metro Manila is able to successfully compete for major KPO business.”
On the other hand, offshore gaming operators occupied about 303,000 sq.m of office spaces in 2018, or about 21% of total net take-up. This is slower than the sector’s share of 35% to 2017 net take-up.
“It might appear that there was a decline from the offshore gaming from 35% down to 21%, but if you look at the absolute figures, the offshore gaming sector continues to record high occupancy in Metro Manila,” Mr. Bondoc said during a presentation in Makati City on Wednesday, adding that offshore gaming operators have taken up 710,000 sq.m. since 2016.
Demand for more office spaces will likely continue in the next 12 months, with 28% of buildings due for completion this year are already 28% pre-leased, according to Colliers data. Based on pre-commitments, Alabang, Makati Central Business District, Fort Bonifacio, and the Bay Area are set to record the strongest take-up this year.
Colliers’ projected demand of about 1 million sq.m. this year will be able to absorb the 1.2 million sq.m. of new office space set to come online in 2019, leading to a vacancy of five percent by the end of the year.
Mr. Bondoc however pointed out that the main challenge for this year is the sustainability of these growth drivers. PEZA proclamations have been facing delays since 2016, which could hamper outsourcing firms’ interest to expand in the country given the lack of incentives.
The property consultant said that there are 805,000 sq.m. of office space in Metro Manila that are pending PEZA approval from 2016 to 2018, while there are 184,000 sq.m outside the metro.
Since 2016, buildings covering 586,000 sq.m were approved in Metro Manila, with only 62,000 sq.m. in Cebu.
“Colliers encourages the government to expedite the approval of PEZA applications to sustain the outsourcing sector’s growth. In our opinion, stakeholders such as developers and qualified occupants should aggressively call of the proclamation of new PEZA spaces in Metro Manila and provincial areas,” the company said. — Arra B. Francia