By Denise A. Valdez, Senior Reporter
THE DEMAND for office space in the country dropped 74% in the first six months of 2020 as Philippine Offshore Gaming Operators (POGOs) began their exodus amid the coronavirus pandemic.
In a recent report by real estate consultancy firm Leechiu Property Consultants (LPC), POGOs were found vacating 48,000 square meters (sq.m.) of office space from March to June, making up 54% of the 89,000 sq.m. of vacated space during the period.
POGOs also recorded zero demand from April to June. LPC tallied 77,000 sq.m. of transactions during the period, most of which were from the Information Technology and Business Process Management (IT-BPM) sector with 42,000 sq.m. of demand.
This resulted in a drop in first-half transactions to 234,000 sq.m. this year from 885,000 sq.m. last year. The composition was also disrupted as POGOs shrunk to 12% of the pie from 40% last year. IT-BPM made up 40% of the composition this year from 41% last year, and other occupiers such as traditional offices grew to 48% of the pie from 19% last year.
LPC is adjusting its yearend forecast to a range of 600,000 to 800,000 sq.m. of office space demand, down from its initial estimate of 800,000 to 1 million sq.m. office transactions.
Despite this, LPC President and CEO David T. Leechiu said the Philippine office market remains “unique in the world” for continuing to record new leases, albeit much less from last year.
“The Philippine office segment has not yet entered a point of contraction,” Mr. Leechiu said. He added support is needed for both the IT-BPM and POGO sectors to fuel the growth of the property sector.
The firm noted the growth of POGOs was stunted by tax regulations and restrictions in movement, as the government put parts of the country in lockdown since March to contain the coronavirus outbreak.
But LPC expects an office space demand of 482,000 sq.m. in the pipeline, of which about 68% will come from the IT-BPM and POGO sectors, and about 323,000 sq.m. will be in Metro Manila.
“The sustained growth of these sectors will allow us to bounce back from this pandemic swiftly. We need as many employers as possible to help our economy,” Mr. Leechiu said.
On the residential segment, LPC said it drew activity from transactions in the Metro Manila condominium market, but no new projects were launched in the second quarter due to quarantine restrictions.
LPC said developers are on a wait-and-see mode as unit sales have been dropping quarter on quarter, shrinking 36% for the January-to-March period, and remaining flat with a 0.2% uptick in April-to-June.
There are now only 23,379 condominium units in Metro Manila’s supply pool, 86% of which are from the middle-income bracket.
The firm said sales from most segments of the middle-income bracket have been declining in the second quarter, due to job losses both locally and abroad. It was offset only by the upscale segment, which posted a sales growth of 35%.
LPC also said large developers remain firm about pricing levels for both primary and secondary units, despite the softening of capital values in central business districts by 5% to 10%. They instead offer cash discounts, lower reservation fees and down payments and flexible payment schemes to spur demand.
“Most owners in high-end gated villages appeared to be holding on to their properties for capital preservation purposes. Owners who do sell at a discount would likely be in need of immediate cash,” it said.
As for the tourism sector, LPC said recovery is expected to come from domestic travelers, mostly in the Luzon area where destinations can be reached by land.
“Despite the looming negativity, LPC is optimistic that the Philippines will have a rapid economic recovery due to a number of simultaneous and conspiring cocktail of virtuous events within the next 6-12 month,” it said, naming infrastructure projects and the continued deflation of interest rates, among others.