PHL office sector to benefit when BPOs bounce back after virus

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By Denise A. Valdez, Reporter

THE office space sector is seen to show some resilience amid the coronavirus disease 2019 (COVID-19) pandemic, as the business process outsourcing (BPO) industry is expected to grow once more after the crisis ends.

Real estate service provider Santos Knight Frank, Inc. sees the Philippines benefiting when foreign companies turn to outsourcing to reduce costs post-COVID-19.

“Global companies will be outsourcing more as a way of cutting down on costs. This will spur demand for the BPO industry in the Philippines, which continues to be attractive because of the country’s competitive costs and young talent,” Santos Knight Frank Chairman and Chief Executive Officer Rick M. Santos said in an online media briefing on Monday.

He noted it is difficult to rely on Philippine Offshore Gaming Operators (POGOs) to drive up demand in the office segment for now, as the POGO sector, which is largely powered by Chinese workers, takes a hit from the suspension of flights between the Philippines and China.


Santos Knight Frank expects new office buildings in Metro Manila to fall to 810,00 square meters (sq.m.) this year from its initial projection of 1.18 million sq.m. Vacancy is also seen to rise to 10% from 5% in 2019.

Once the situation normalizes, the firm said tenants will start “value-hunting,” or searching for attractive lease terms across the Philippines.

“We saw examples of that with call centers from India post-Global Financial Crisis… So we do expect to see that, and we do forecast that there will be an adequate amount of office space either currently on the market or under construction now,” said Morgan McGilvray, Santos Knight Frank senior director for Occupier Services & Commercial Agency.

“As we all know, for the BPO sector, the lower the cost, the better for this market. So if rents are going down, if operating costs are going down, that’s actually an opportunity to have bigger, better presences in the Philippines as opposed to other BPO sectors around the world,” he added.

Aside from the office segment, the industrial and logistics sectors are also seen to be resilient both during and after the virus outbreak, as the production and delivery of goods are continue during the lockdown period.

The growth of e-commerce, as heightened by the lockdown period, is also expected to drive up the need for industrial and logistics spaces to support an increase in demand from online customers.

Health care-related properties are likewise seen to attract new investors once the crisis is over, as people all over the world are expected to be more health-conscious after the COVID-19 pandemic.

And overall, property owners across all real estate segments are expected to provide higher importance to property and facility management given the increased expectations from buyers and tenants.

“Landlords and developers should implement sustainable and wellness-oriented developments and international best practices as tenants become more conscious of the impact of real estate on the health of their employees,” Mr. Santos said.