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THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday on the back of strong demand and even as rates mostly rose following hawkish signals from the US Federal Reserve.
The Bureau of the Treasury (BTr) raised P15 billion as planned from the T-bills it offered on Monday as total bids reached P38.296 billion or more than twice the amount on the auction block.
Broken down, the BTr borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P15.25 billion. The three-month paper was quoted at an average rate of 5.719%, 0.7 basis point (bp) higher than the 5.712% seen last week. Accepted rates ranged from 5.698% to 5.725%.
The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P11.16 billion. The average rate for the six-month T-bill stood at 5.886%, up by 2.2 bps from the 5.864% fetched last week, with accepted rates at 5.869% to 5.909%.
Lastly, the Treasury raised the planned P5 billion via the 364-day debt papers as demand for the tenor totaled P11.885 billion. The average rate of the one-year debt went down by 3.6 bps to 6.043% from the 6.007% quoted last week. Accepted yields were from 6% to 6.084%.
At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7881%, 5.9429%, and 6.0323%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
“The offered T-bill rates today reflected upward shift amid persistent hawkish policy remarks from various Federal Reserve officials and as seconded by the minutes of their latest policy meeting last week,” a trader said in an e-mail on Monday.
The US central bank’s hawkishness resulted in reduced market expectations of a rate cut this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Federal Reserve officials at their last policy meeting said they still had faith that price pressures would ease at least slowly in coming months, but doubts emerged about whether the current level of interest rates was high enough to guarantee that outcome and “various” officials said they’d be willing to hike borrowing costs again if inflation surged, Reuters reported.
That meeting was held before data showed the pace of consumer price increases beginning to cool again in April, yet reflected what US central bank officials since then have said is increased uncertainty about the path of inflation and monetary policy.
“Participants… noted that they continued to expect that inflation would return to 2% over the medium term,” according to the minutes of the April 30-May 1 meeting, but “the disinflation would likely take longer than previously thought.”
While the policy response for now would “involve maintaining” the Fed’s benchmark policy rate in the current 5.25%-5.5% range, “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate,” the minutes said, employing a modifier not included in the usual set of words — like some, many, and most — used in the minutes to give a sense of how many officials voiced a particular opinion.
Fed Chair Jerome H. Powell and other policy makers have since said they feel further rate hikes are unlikely.
But the minutes released on Wednesday excluded specific reference to that notion and to the likelihood of rate cuts this year.
The March 19-20 meeting minutes said that participants had “judged that the policy rate was likely at its peak for this tightening cycle, and almost all participants judged that it would be appropriate to move policy to a less restrictive stance at some point this year if the economy evolved broadly as they expected.”
In place of that broad judgment, the latest minutes showed an emerging debate about just how tight monetary policy is, an important consideration that could bear on how fast inflation returns to the central bank’s 2% target — or whether it gets there at all.
Monday’s offer was the government’s last T-bill auction for the month. The BTr raised P62 billion from T-bills this month, higher than the P60-billion program, as it made full awards at all its offerings and upsized its award for one amid strong demand.
On Tuesday, the BTr will offer P30 billion in reissued three-year Treasury bonds (T-bonds) with a remaining life of two years and seven months.
The Treasury wants to raise P210 billion from the domestic market this month, or P60 billion from T-bills and P150 billion via T-bonds.
The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy with Reuters
We all know the issues of the day: persistent inflation that affects customer spending, new technologies that disrupt how business gets done and how customers interact with brands, new products and services from new competitors, and a changing country demographic that challenges how we hire and retain talent. Companies can take many strategies and actions to succeed in this environment. However, growth-focused busi-nesses are best positioned to be resilient and thrive today.
For all businesses, creativity and innovation are the necessary ingredients for growth. Growth is what attracts, keeps, and engages executives and talent. Growth conveys a winning culture to the organization. Growth allows a company to set the pace, keeping competitors at bay. Most importantly, growth is an endorsement from customers that a company’s products and services remain relevant.
The consequences of neglecting growth are dire. A company that fails to prioritize growth risks a decline in revenue or income, which can lead to negative sentiment among customers, suppliers, and other stakeholders. This is a risk that no business can afford to take lightly.
But how and where do we find growth? This is not a question to be taken lightly. A company must carefully consider and choose one or more of several strategic approaches to generating growth, each requiring thoughtful planning and execution.
One approach is to re-align the business portfolio through an acquisition and divestment program. This can involve acquiring businesses in similar or complementary markets or even partaking in vertical integration. And over time, some businesses might perform better under new owners. Such divestments can inject capital for new growth opportunities.
The second approach is to find new revenue growth from existing “core” businesses. Rebuilding the core business is often necessary to deal with disruptions caused by technology, changes in customer behavior, or new en-trants. Are there markets and customers we need to serve better with our products and services? Are there ways to extend our products to different customer segments?
The third approach is entering related or complementary markets, sometimes called “adjacent” businesses. What capabilities does the company have that would be relevant or be a competitive edge when used differently? Amazon realized its e-commerce IT infrastructure could be used by other companies looking to cut costs and quickly respond to market changes. Globe Telecom leveraged its mobile customer relationships and sales channels to enter financial services with GCash.
The last approach is finding completely new business opportunities through innovation and investment. While this is often associated with start-ups and venture capital, many companies and even conglomerates in the Phil-ippines are experimenting with new ways to serve unmet customer needs. In this approach, a company looks at its resources and capabilities to build new revenue streams. Telcos, for example, are leveraging their capabilities to create healthcare ventures. Another example is that poor financial inclusion, married with mobile technology and apps, led to the creation of digital banks.
Few took notice that many years ago, the United Nations declared April 21 as the “World Creativity and Innovation Day” to acknowledge that “innovation is essential for harnessing the economic potential of each nation and the importance of supporting mass entrepreneurship, creativity and innovation which create new momentum for economic growth and job creation and expand opportunities for all, including women and youth.”
All these approaches — rebalancing a business portfolio, turbo-charging existing revenue streams, fostering creativity, and harnessing innovation and growth — take time and effort. A company and its Board must bravely allocate the necessary talent, time, and resources. They should take bold actions, especially in these times of uncertainty when it is far too easy to just be defensive.
In my past first-hand experiences with all four approaches to finding growth or finding new revenue opportunities, I can share the following seven key lessons:
1. Communicate the company’s “burning platform.” This will focus everyone’s attention, from shareholders to boards to leaders to employees, and enable the hard work required.
2. Truly understand the customer beyond demographic or psychographic profiles. In the words of the late Clayton Christensen, who extensively researched disruption: “A ‘job to be done’ is a problem or opportunity that somebody is trying to solve. We call it a ‘job’ because it needs to be done, and we hire people or products to get jobs done.”
3. Adapt the growth strategies, innovation structure, and process to the company’s situation. Is the core business or revenue stream under competitive attack? Are there new competitors, and what are they after? Is the core business subject to disruption because of the macro environment, customer changes, or technology adoption? Is the company in a race to get the first customers or users?
4. Create a disciplined stage-gate process, with milestone-based funding of new initiatives and regular progress monitoring. Innovation is not just about brainstorming and doing the sexy new initiatives, but rather the consistent tests, discarding ideas, and funding the following stages until fruition.
5. Facts win — and in the absence of facts, test. The loudest voices or senior people often dictate what a company must do next. We usually forget that if we are in a business-to-consumer (B2C) business, “we are not the customer.” In business-to-business (B2B), product discovery and selection involve many people, making it harder to discern buying behavior.
6. Accept that there is no silver bullet; innovation often takes years. Even M&A’s ability to generate new revenues does not produce instant results, and we cannot take the hard work of integrating and retaining key talent for granted.
7. Finally, setting the tone from the top with an engaged leadership team is crucial. By involving as many people as possible in the company’s “burning platform” and the various initiatives being explored or implemented, we can ensure that everyone feels valued and integral to the company’s operations.
Over the past decade, we have witnessed how technology, changing demographics, and continued investment have transformed how we lead our lives and interact with each other, leading to continued economic growth.
Look closely: all four approaches to finding growth have fueled them. Let’s not forget Christensen’s words: “If you frame your business in terms of products you’re trying to sell, life comes and goes, and you get supplanted by other products and technologies,” he says. “But if you deliver something that does the job well, it will open up opportunities to use new technologies as they emerge. What your business is about is doing the job better and better.”
Let us all be brave in seeing growth and creating the positive impact our products and services can have on our fellow Filipinos.
(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP.)
Gil B. Genio is a member of the MAP and a retired Ayala and Globe executive. His last role was Globe’s Chief Strategy Officer (2010-2021) as well as Chief Technology and Information Officer (2015-2021). He is currently an Independent Director at publicly listed companies GT Capital Holdings and Puregold Price Club. He is a Fellow of the Institute of Corporate Directors.
THE BOARD of publicly listed Coal Asia Holdings, Inc. has approved a proposal to lower the par value of its shares to improve liquidity and entice more investors.
The board on May 23 approved the cut to 10 centavos from P1 based on its articles of incorporation, the company said in a stock exchange filing on Monday.
Par value or the face value of a stock does not fluctuate unlike its market value.
“The proposed amendment to Article 7 shall reflect the decrease in the par value of shares of stock from P1 to P0.10 to improve the liquidity in the trading of the corporation’s shares, as well as boost investor interest in and wider distribution of the corporation’s shares of capital stock thereby shoring up its marketability,” Coal Asia said.
It said the proposal to lower the par value of its shares would be submitted for stockholders’ approval during its annual stockholders’ meeting on July 1.
“The foregoing amendments are subject to the approval of the shareholders and further approval of the Securities and Exchange Commission of the application for the amendment of Coal Asia’s articles of incorporation,” it said.
Coal Asia is a holding company that acquires companies specializing in the exploration, development and mining of coal and other energy-related businesses in the Philippines and around Asia.
It owns Titan Mining and Energy Corp., which has 13,000 hectares of coal resources in Davao Oriental and Zamboanga Sibugay.
Coal Asia stocks were unchanged at 20 centavos each. — Revin Mikhael D. Ochave
KITCHIE NADAL will return to the concert stage in SAME GROUND: Kitchie Nadal’s 20th Anniversary Concert at the New Frontier Theater, Quezon City, on June 2.
Twenty years since the release of her multi-platinum self-titled debut album, Ms. Nadal has maintained her relevance even among Gen Zs. Regarded as an early 2000s pop culture icon, hits like “Huwag Na Huwag Mong Sasabihin,” “Bulong,” and “Same Ground” keep her in the Top 10 list of Spotify Philippines’ most-streamed original Pilipino music (OPM) female artists today.
It is in this context that she has decided to perform her most popular songs to a crowd once more.
“It started because ‘Same Ground’ went viral on TikTok, and the song went through a resurgence,” Ms. Nadal said during a press conference at the Gozon Compound in Malabon City on May 23. “It makes me happy that my songs resonate with the younger generation.”
As for the concert title, she added that the song was chosen for its clever play of words. “I’m not on the ‘same ground’ anymore, being based in Spain, but now I am because I’m back for the concert,” she said.
Ms. Nadal married Spanish journalist Carlos López in 2015 and they now have two children. They are currently based in Madrid, Spain.
According to a press release, the homecoming show will serve as “a celebration of Kitchie’s monumental journey as one of the biggest-selling and most influential Pinoy rock figures from the early 2000s to the present.”
For Ms. Nadal, her lasting reputation is motivation for her to continue making songs, the latest of which is the single “Lahat,” which is dedicated to her family.
“It’s as rewarding as an artist to be arranging songs in the studio as it is to be rehearsing with a band and doing live shows,” she said.
Of the difference between her music now and then, Ms. Nadal said that it’s her inspiration that makes all the difference. “I’m inspired by my children and my husband, so that’s why my music is lighter and more positive now. What’s the same is that I want my songs to still be authentic and relatable.”
The concert will also feature several local artists who were her contemporaries in the 2000s band scene — Barbie Almalbis, Aia de Leon, Lougee Basabas, Hannah Romawac, Acel Bisa, and Monty Macalino of Mayonnaise.
These people have been her friends over the years, a connection held together by a passion for music and for shaping the new generation of artists.
“In my time, we needed a lot of support from the recording label, but now, the young ones like Zild can record at home and promote their own stuff through social media,” she said. “It’s great to inspire the younger generation.”
As for what to expect at the concert, Ms. Nadal teased that there will be both hits and underrated tracks from her debut album. “Pwede surprise na lang? (Can’t it be a surprise?)” she asked the media.
SAME GROUND: Kitchie Nadal’s 20th Anniversary Concert on June 2 is presented by Big Brew and Rolling Gum, in partnership with GNN Entertainment Productions. Tickets are now available via Ticketnet online and outlets nationwide and range in price from P1,200 to P4,000. — Brontë H. Lacsamana
THE EUROPEAN Central Bank (ECB) is ready to cut interest rates next month but policy must continue to be restrictive this year as wage growth will not normalize until 2026, ECB Chief Economist Philip Lane told the Financial Times (FT).
The ECB has all but promised a rate cut for June 6, so the debate has shifted to subsequent moves and markets have dialled back their expectations, betting on just one more cut this year.
“Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction,” Mr. Lane told the FT in an interview published on Monday.
“The best way to frame the debate this year is that we still need to be restrictive all year long,” he added. “But within the zone of restrictiveness we can move down somewhat.”
While Mr. Lane made no explicit comment about the July policy meeting, a string of policy makers including fellow board member Isabel Schnabel have already said that a second step should not come quite so soon.
Wage growth is expected to “visibly” decelerate next year and policy makers can then debate normalizing policy.
At 4%, the ECB’s deposit rate holds back growth and there is little debate that the first few cuts, at least until 3% but possibly further, merely remove restriction rather than provide stimulus.
“We need to see more progress (on inflation) before we move from maintaining the restrictive phase to thinking about normalization,” Lane added.
Mr. Lane said ECB policy makers needed to keep rates in restrictive territory this year to ensure that inflation kept easing and did not get stuck above the bank’s target, which “would be very problematic and probably quite painful to eliminate”.
A key wage indicator accelerated last week, spooking some but Mr. Lane said the figure was well anticipated and a slowdown was already in the works.
“Deceleration does not necessarily mean an immediate return to steady state,” Mr. Lane said. “This year the adjustment is clearly quite gradual.” — Reuters
MENTAL HEALTH ISSUES are an increasingly large part of the global burden of diseases and a leading cause of disability. This disturbing trend was made most evident during the COVID-19 pandemic, which contributed both to a sharp rise in mental health disorders and a disruption in critical mental health services.
The most common types of mental health disorders include anxiety and depressive disorders, but many such disorders impact people’s lives, including those involving substance abuse, eating issues, schizophrenia, as well as psychotic and neurodevelopmental problems. Global evidence shows that even during non-emergency settings, one in five people worldwide are living with mental health disorders, and over 80% of them are living in low and middle-income countries. The burden of mental health disorders varies across populations, but is experienced most acutely by vulnerable populations, particularly in countries lacking resources, expertise, and infra-structure. Poverty and poor mental health are intertwined. Poverty increases the risk of mental illness, and those with untreated mental illness are more likely to fall into poverty. Poor mental health has a direct impact on a person’s life by reducing the ability to study and work productively, thereby compromising their overall contribution to economic development.
Despite its inclusion in the Sustainable Development Goals, only 2% of total government health expenditure and 1% of global development assistance for health are dedicated to mental health, according to the World Health Organization’s Mental Health Atlas 2020.
Most mental health-related expenditures in low and middle-income countries have been spent on treatment in hospitals and services at the primary or community care level. Addressing mental health plays a key role in sustainable development and should be linked to efforts to achieve social equity and progress towards universal health coverage.
Comorbidities between mental health disorders and rising noncommunicable diseases highlight their common risk factors. Integration of mental health within primary health care is a key strategy to improve access to mental health services, alongside promotion of mental health literacy in schools and workplaces.
Many people do not receive any formal treatment or intervention for their mental health conditions. This unmet need, or treatment gap, for mental health problems and disorders is notably high at 30%-50% for depressive disorders and 50%-70% anxiety disorders.
The most common challenges in low and middle-income countries include lack of awareness, stigma, a lack of services, human resources, and prevention and promotion programs, as well as limited data and financial barriers.
To address these problems, priorities for global mental health policy should include:
While mental health issues were exacerbated and accelerated by the pandemic, an increased focus on health by governments offers an opportunity to address this issue as part of sustainable development.
Increasing digital integration for mental health can promote better networks between primary care and specialist health care providers and facilitate interoperability across health information systems.
This requires multisector public – private partnerships within and outside the health system. It will also require engaging the education and social sectors to help increase mental health literacy, promote awareness of mental well-being, and build a productive workforce.
In this way, we can pave the way for mental health security and help countries to better prepare for future mental health emergencies.
Vasoontara Yiengprugsawan is a Senior Universal Health Coverage Specialist at ADB. MICHELLE APOSTOL is a Health Officer at ADB, and DINESH ARORA is a Principal Health Specialist at ADB.
SAN MIGUEL Corp. (SMC) is proceeding with its P95-billion Pasig River Expressway (PAREX) project, its top official said on Monday.
“We cannot [withdraw],” San Miguel President and Chief Executive Officer Ramon S. Ang told reporters. “We are addressing the concerns, but it is currently on hold.”
In March, Mr. Ang said the company would abandon the project — a 19.37-kilometer six-lane, all elevated expressway that traverses Pasig River — amid public opposition given its impact on the environment.
The project is expected to provide an alternative and faster link to Metro Manila’s largest business districts such as the Makati Business District, Ortigas Center and Bonifacio Global City.
Critics have said the project could compromise the river’s functionality, cause air pollution and affect heritage structures and sites.
Last week, the Toll Regulatory Board (TRB) said San Miguel had not officially terminated the project.
The TRB said it could not terminate the project, adding that there are monetary consequences under the supplementary toll operation agreement if the government ends it.
In 2023, the Environment department said it would study the project’s environmental impacts.
The TRB said its study on the PAREX project was on hold after SMC in March said it would abandon the project. — Ashley Erika O. Jose
NO ONE else did schlock quite like he did. Carlo Magno Jose Caparas, billed as Carlo J. Caparas in his work in cinema, has died. He was 80 years old.
The news was confirmed through a Facebook post by his daughter, Peach Caparas, on May 26. The post was an ode to her father titled, “Sa Bawat Tipa ng Makinilya” (For every stroke of the typewriter’s keyboard). There, she detailed some of the intellectual properties that have sprung from him: “Panday, Pieta, Elias Paniki, Bakekang, Totoy Bato.”
Born in 1944 to a working-class background, Mr. Caparas took a series of odd jobs, culminating in a stint as a security guard at a publishing house. His night shift gave him the time to entertain himself by reading, until a stray bullet during a company strike struggle forced him to take a leave. The pause led to the publishing of his first comic, called “Citadel,” published in Superstar magazine.
One of his most popular comics, “Ang Panday,” was adapted to film in 1980, starring Fernando Poe, Jr., later dubbed The King (of Philippine cinema). While Mr. Caparas already had a string of films to his name thanks to his Golden Lion Films International production outfit, also adaptations of his work in comics, Panday was a sure hit with all who were involved. To this day, the comic series is still being adapted, fostering a formidable franchise.
In the 1990s, however, Mr. Caparas would be known for his gory “massacre” films, which tackled crimes that terrified a nation. He marked 1993 with The Vizconde Massacre: God Help Us! (based on the 1991 murders of the middle-class Vizconde family), The Myrna Diones Story: Lord Have Mercy! (based on the 1992 massacre of a Cordillera family), and Humanda Ka Mayor! Bahala na ang Diyos (loosely based on the 1993 Eileen Sarmenta rape-slay case). All of these films had gore, melodramatic music, rather questionable decisions of taste (the Vizconde movie was shot in the same house where the murders took place), and the screams of Kris Aquino (the presidential daughter and then-budding actress, yet to hit her stride as a well-loved television host, who gained the description “Massacre Queen” for starring in these films). Still, the formula worked: Mr. Caparas saw out the 1990s and the early 2000s with sensationalized depictions of brutal and topical crimes.
His other film credits include movies about rape victims and actresses Maggie dela Riva and Annabelle Huggins, murder victim Delia Maga (a film by Joel Lamangan about her alleged murderer, convict Flor Contemplacion, the execution of whom caused diplomatic unrest between Singapore and the Philippines, was released the same year with Nora Aunor in the title role; a more decidedly villainous Elizabeth Oropesa plays her in Mr. Caparas’ version of events), and murder victim actress Lilian Velez (played by Sharon Cuneta; Mr. Caparas was a whiz at setting up star-studded casts).
In 2009, Mr. Caparas was involved in a controversy when he and six others were proclaimed as National Artists of the Philippines. The honor was disputed by the National Commission for Culture and the Arts (NCCA) and the Cultural Center of the Philippines (CCP), among other artistic bodies and individual artists. The complaints were raised due to the nature of Mr. Caparas’ work, as well as the presidential prerogative exercised by then-president and now Representative Gloria Macapagal-Arroyo. In 2013, the Supreme Court declared the National Artist proclamations of Mr. Caparas, Philippine Educational Theater Association founder Cecile Guidote-Alvarez, fashion designer Pitoy Moreno, and architect Francisco Mañosa, null.
While the franchises spawned by his comic series live on, his last actual film credit was for 2017’s Kamandag ng Droga. A street in Pasig is named after him, and Mrs. Macapagal-Arroyo awarded him with a Presidential Medal of Merit in 2007.
His wife, Donna Villa, died in 2017; and they are survived by children CJ and Peach.
“Dad, you will forever be loved, cherished, and honored… by all of us. Love, The children of a King,” said Ms. Caparas in her Facebook post.
The wake, as announced by Ms. Caparas, will start on May 27, from noon to midnight at the Golden Haven Memorial Chapels and Crematorium, Villar Sipag, C5 Extension Road, Brgy. Manuyo Dos, Las Pinas. — Joseph L. Garcia
PHILIPPINE National Bank (PNB) is looking to raise at least $300 million from an issuance of offshore bonds, it said on Monday.
The offer, which has an option to upsize, was approved by the bank’s board of directors on May 24, the lender said in a disclosure to the local bourse.
Alongside the offer, PNB’s board also approved the doubling of its euro medium-term note program to $2 billion from $1 billion previously.
The approved offer will be issued out of this updated program, the bank said.
In 2019, PNB raised a record $750 million from the offshore debt market through fixed-rate senior notes, more than double its $300-million target, as the order book reached $3.25 billion.
These bonds were priced at 99.473% for a yield of 3.391% and a coupon rate of 3.28%.
Proceeds from the bonds were used to support PNB’s loan expansion.
PNB’s net income rose by 10.39% year on year to P5.31 billion in the first quarter amid higher interest earnings and decreased provisions and expenses.
As of end-2023, PNB was the seventh-largest bank in the country in terms of assets with P1.21 trillion, latest central bank data showed.
Its shares down by 15 centavos or 0.65% to end at P23 apiece on Monday. — AMCS
DURING the first quarter (Q1), total office transactions in Metro Manila reached 240,100 square meters (sq.m.), 88% higher versus the same period in 2023. Traditional firms cornered 44% of total office space deals recorded in Metro Manila, followed by business process outsourcing firms (BPOs) at 33% and Philippine Offshore Gaming Operators (POGOs) at 23%.
While transactions volume has increased year on year (YoY), we noted that area size requirements of some tenant classes have decreased. For instance, the average deal size of traditional firms decreased from 800 sq.m. to 600 sq.m.
Despite sustained demand, net take-up remains muted (75,000 sq.m. in Q1 2024) in Metro Manila due to continued space surrenders due to nonrenewal and rightsizing of occupiers. In Q1 2024, we recorded 161,000 sq.m. of new surrenders, slightly higher than the average quarterly vacated space of 145,000 sq.m. in 2023. We expect this trend to persist until early 2025 as the remaining pre-pandemic leases are yet to expire.
2024 US ELECTIONS SEEN TO PAUSE NET DEMAND
The 2024 US Elections is expected to affect net take-up as the largest office space occupiers are outsourcing companies which get as much as 60% of their businesses in America. Colliers’ historical office market data has shown that over the past three pre-pandemic US Elections, office net demand peaks the quarter before the end of the elections as occupiers are signing up deals before the election has decided.
On average, net demand decreased by 30% quarter on quarter (QoQ), yet eventually recovers by 40% QoQ in the succeeding quarter of the election period.
PERSISTING HIGH VACANCY MARKET
While overall Metro Manila office vacancy marginally improved to 19% in Q1 2024, we expect this to increase to 19.6% by end-2024 given new supply completions and space surrenders. The volume of vacated spaces is expected to follow the trend of office transactions as the market is still contending with expiring pre-pandemic leases.
FLATTISH RENTAL GROWTH
Growth of headline rates in Metro Manila remains flat as we recorded an increase of only 0.6% YoY. Rental spreads (i.e the difference from headline to transacted rates) range between from 5% to as high as 30%, especially in high vacancy markets such as Bay Area.
BRIGHT SPOT IN THE COUNTRYSIDE
The countryside saw better performance during the first three months of the year. A total of 52,000 sq.m. of office deals were recorded in provincial areas, with Metro Cebu (35%) leading in terms of activity followed by Pampanga (17%) and Davao (15%).
While there is an increase in demand for office space in provincial areas, Colliers has noted that some markets have limited availability of options for outsourcing locators with typical area size requirements of 2,500 sq.m. Using our Q1 2024 data, Colliers has identified regions with high, middle, and low availability of options for a typical BPO requirement of 2,500 sq.m. Some areas identified with moderate to low supply are Bacolod, Iloilo, Cavite, Davao, Cagayan de Oro, and Dumaguete.
MAXIMIZE EXISTING MARKET CONDITIONS
The current market condition presents opportunities that both tenants and landlords can take advantage of. We encourage tenants to review their real estate as early as 18 months before lease expiry date to have a better position for a good renewal or relocation.
The leasing process has now lengthened as current hybrid policy and employee demographics have become key considerations in real estate planning. We advise that the first six months be dedicated to workplace strategy, i.e, studying utilization metrics and employee locations then the next 12 months be spent for proper site selection, landlord discussions and fit-out construction or renovation.
While landlords taper down Metro Manila supply in the next four years, refurbishment of aging properties in their current portfolio is encouraged to support market-competitive rental rates. Developers are also encouraged to assess their provincial office pipeline and ramp up the construction of ongoing projects in identified key locations with low availability of options.
Kath Taburada is a senior market analyst, while Kevin Jara is the director, both at Colliers Philippines.
By Ashley Erika O. Jose, Reporter
THE PHILIPPINES should start subsidizing power costs and explore oil reserves in the South China Sea to lower electricity rates, according to business tycoon Ramon S. Ang.
“There is a big natural gas field in the West Philippine Sea [and] we should concentrate on developing that in the future,” the San Miguel Corp. president and chief executive officer told reporters on the sidelines of an economic forum on Monday, referring to areas of the sea within the Philippines’ exclusive economic zone. “The area is disputed but we should explore that in the future.”
Mr. Ang said the country has high electricity costs in the absence of state subsidies aside from taxes on power and oil products.
The Electric Power Industry Reform Act of 2001 deregulated the Philippine power industry and privatized state-owned power generation and transmission assets.
The measure was enacted supposedly because government control of the industry inhibited private sector expansion.
But the Department of Energy sees no need to subsidize power costs.
“What is the need for it if we trust private sector investors to come in and invest in the Philippine energy sector?,” Energy Assistant Secretary Mario C. Marasigan told BusinessWorld in an interview. “What’s the need for a subsidy?”
The Center for Energy, Ecology and Development in a 2020 report said the Philippines has the second-highest electricity prices in Asia at P8.96 per kilowatt-hour on the average.
Meralco has said the rate for a typical household would rise to P11.41 per kilowatt-hour this month.
National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said the Philippines is leaning toward not subsidizing the oil and power sector.
“We should avoid subsidizing power, electricity and fuels generally because the biggest consumers of fuels are the rich,” he said on the sidelines of the forum.
