INFORMATION technology-business process management (IT-BPM) firms are expected to drive demand for office spaces this year, although overall office leasing activity is likely to remain subdued in the first half of 2022, JLL Philippines said.
“For the office market, we’re seeing signs of market stability. For Q4 2021, what we saw was a moderate take-up of 75,713 square meters (sq.m.) in gross leasing volumes,” JLL Philippines Head of Research and Consulting Janlo C. de los Reyes said in a briefing last week.
While lower than previous quarters, Mr. De los Reyes noted sentiment has improved.
IT-BPM companies were the key office market drivers in the fourth quarter and accounted for 62.5% of the overall office take-up in 2021.
However, the work-from-home guidelines implemented by the Philippine Economic Zone Authority (PEZA) for ecozone locators may curb the IT-BPM sector’s expansion this year.
“A lot of the IT-BPM occupiers have deferred their dealing decisions until they have clarity with regard to the guidelines set by PEZA… In the third quarter of last year, we saw pick-up in terms inquiries by a lot of the IT-BPM companies as they are waiting on the PEZA moratorium decisions. And with that being deferred to March 2022, we saw leasing activity go down,” Mr. De los Reyes said.
The Fiscal Incentives Review Board extended the remote work arrangements for IT-BPM firms located within PEZA ecozones until end-March. Under the guidelines, outsourcing firms are allowed to have most of their workforce at home until March but they must have 10% of their employees on site.
“We do expect the same narrative for this coming March. We do think that the PEZA may further extend the moratorium given the Omicron variant as well as the market performance over the next coming months,” Mr. De los Reyes said.
He noted many occupiers are now embracing a hybrid work model, “meaning they’re open to having a percentage of their workforce work remotely.”
Also, the upcoming May elections may dampen office leasing activity at least within the first half.
“We might see leasing activity slowdown as more investors as well as occupiers postpone their leasing decisions as they wait and see whether policies might change in relation to their portfolio and investment decision,” Mr. De los Reyes said.
Aside from IT-BPM sector, technology, e-commerce, and logistics companies are also expected to fuel office space demand this year.
Philippine Offshore Gaming Operators (POGOs), which drove the office market pre-pandemic, are anticipated to make a comeback.
“I think POGOs may return but definitely not the same size as the previous period. I think what we may see that there is also a bit of apprehension from landlords,” Mr. De los Reyes said.
Meanwhile, JLL Philippines said newly built real estate spaces is expected to “exert pressure on real estate recovery,” as this would dampen the market in the short term as demand would not support supply.
The property services firm expects 838,000 sq.m. of new office spaces, retail expansion of 497,000 sq.m., 23,000 sq.m. of new residential spaces, and 7,000 sq.m. for the hospitality sector.
“Everyone was looking at 2021 as the recovery year for the market, but I think it was still part of our journey to recovery. We do expect the same story for 2022, but definitely, there are signs that are pointing at improved movement with regard to the real estate market for this year,” Mr. De los Reyes said. — K.C.G.Valmonte