By Denise A. Valdez
PROPERTY OWNERS should target more traditional tenants as the coronavirus pandemic dampens office space demand from offshore gaming operators.
In a recent report, real estate consultancy firm Colliers International Philippines said the travel ban due to COVID-19 (coronavirus disease 2019) may result in a significant rise in office and residential vacancies with the absence of Philippine Offshore Gaming Operators (POGOs), which mainly employ Chinese workers.
In such an event, landlords are advised to proactively seek traditional or outsourcing tenants that may take office and residential space left empty by POGOs.
“Landlords should target traditional and outsourcing tenants considering our expected decline in demand from POGOs,” it said. “Communicate early with tenants regarding flexible lease terms, and emphasize wellness features and certifications.”
The Philippines has suspended air travel to China for the period of the Luzon-wide enhanced community quarantine which is scheduled to end on April 30.
Colliers is estimating office vacancy in Metro Manila to rise up to 8% if POGOs will stop taking space this year. But traditional companies can help bridge the gap by the second half, limiting office vacancy to below 7%, if the outbreak peaks in the first half and the quarantine does not last too long.
Residential vacancy in Metro Manila is also seen to rise to near 20% from 11% last year, should the situation worsen and the decline in POGO demand persist. Colliers estimates the completion of about 14,720 residential units in key Metro Manila districts this year.
“The concern is on the secondary lease and resale market, especially in the Bay Area where demand has primarily been driven by POGOs. In our opinion, if prices soften, developers are likely to stop launching (new projects),” it said.
Colliers said a “coordinated policy and monetary response” from the government and the Bangko Sentral ng Pilipinas will bring back confidence in the property market by end-2020, assuming the outbreak will hit its peak within the first half.
In the meantime, office landlords should improve wellness features of buildings and boost property management capabilities. Given the virus outbreak, buyers are more conscious about health and safety, making it the right time to highlight efforts to maintain building sanitation.
To attract tenants, Colliers said landlords should offer more flexible terms.
On the other hand, tenants and buyers should “look for units in fringe areas where there is still potential for capital value appreciation and where price increases have been due to end-user demand.”