THE office market may bounce back as early as next year, if the coronavirus disease 2019 (COVID-19) outbreak is contained within the second half of 2020, according to research by the Lobien Realty Group (LRG).
“The Philippines’ real estate industry, in particular, has been seriously impacted by COVID-19 as the pandemic effectively put a stop to the operations of most businesses,” the real estate consultancy firm said in a statement.
In particular, the Metro Manila office market has considerably slowed since strict lockdown measures were implemented in mid-March.
LRG noted the expansion of Philippine Offshore Gaming Operators (POGOs) was halted due to the government’s travel ban on China and the enhanced community quarantine (ECQ) in Metro Manila.
POGOs, which have fueled the office market’s growth, has occupied 1.14 million sq.m. of office space since 2016
While the Philippine Amusement and Gaming Operations Corp. (PAGCOR) recently gave the green light for POGOs to resume partial operations, the outlook for their expansion remains dim.
“Projected POGO office demand this 2020 is 200,000 square meters (sq.m.) less as contribution from POGO is expected to slip by $0.8 billion (or around 0.2% of GDP),” LRG said.
Business process outsourcing (BPO) firms, which are feeling the pain from the pandemic, may consider expanding in the provinces rather than in Metro Manila. LRG noted the BPO industry saw office take-up of 400,000 sq.m. last year.
“BPOs, another hardest hit industry, may soon scout for alternative business locations in the emerging provincial hubs which offer more competitive rental rates and lower labor costs and have become sites of new government infrastructure projects,” LRG said.
LRH said there is currently a 15% office vacancy across all provincial business districts, with 257,000 sq.m. of new office space to become available this year.
“The average rental rate for provincial business hubs is at P606 per sq.m., which makes it more affordable than Metro Manila,” it added.
Meanwhile, traditional offices may opt to continue work-from-home arrangements with employees as a way to lower costs. Traditional offices leased 370,000 sq.m. of space in 2019.
However, LRG predicts “there could be an improved demand for office space by 2021 at a minimum of 700,000 sq.m. across Metro Manila, provided that the COVID-19 outbreak will be contained by 2nd half of 2020.”
“The demand for office space will be revived towards the latter part of the year once existing and new POGO companies as well as BPO companies continue their growth all over the country,” LRG said.
The BPO sector may also see stronger demand from global companies that need to outsource their businesses amid the pandemic, LRG added.
For the residential market, LRG said take-up will “likely soften” due to the travel restrictions and an expected rise in local unemployment.
“Prices in the secondary market are expected to decrease from its market value. Price appreciation will remain inactive depending on how the market will stabilize from the ECQ,” LRG said.
However, prices of new residential properties are expected to remain at the same level prior to the ECQ.
“There is an opportunity for the secondary market to grow as less affluent property owners dispose their assets for liquidity,” it added. — Cathy Rose A. Garcia