MANILA, Philippines — The Philippine office market registered a 34 percent rise in demand in the months of April and May despite the imposition of community quarantines around the country, Leechiu Property Consultants (LPC) said.
In a statement, LPC said office demand in January to May this year reached 211,000 square meters(sqm), a 54,000 sqm increase from the 157,000 sqm registered in January to March 2020.
Out of the total demand, Metro Manila accounted for 60 percent, while 40 percent came from the provinces.
“We expected zero demand in the second quarter of 2020, but despite the quarantine, we’ve seen transactions concluded,” LPC chief executive officer David Leechiu said, referring to the enhanced community quarantine (ECQ) and modified ECQ (MECQ) from March 15 – May 31, 2020.
“(The) Philippines is most likely the only office market in the world that is still growing in demand today,” he said.
In terms of industry drivers, 37 percent of demand came from the IT-BPM sector, followed by POGOs with 13 percent, while the remaining 50 percent came from traditional offices, corporate tenants and flexible workspaces.
“We also expect IT-BPM demand to surge once more by year-end when both the Philippines, US and other countries would have adapted to a new normal,”Leechiu added.
For this year, LPC forecasts office space demand to reach approximately 800,000 sqm, driven by the demand from the IT-BPM and POGO industries, combined with improving investor and public confidence.
Leechiu expressed confidence in the IT-BPM sector, citing the country’s performance during the 2008 global financial crisis, where the Philippines was the only market in the world where office demand did not contract owing to expansions from this sector.
“Office demand from the IT-BPM sector has been stable and growing modestly throughout the decade,” LPC said.
Meanwhile, Leechiu said POGOs are also expected to make a comeback by the end of June and further drive demand.
Last May, the Bureau of Internal Revenues (BIR) issued a memorandum requiring POGOs to discontinue operations until they have settled taxes and secured a BIR clearance.
Leechiu forecasted that most, if not all, POGOS would be 30 to 50 percent operational by end-June following a compromise agreement between the BIR and POGOs.
“As soon as travel restrictions are lifted, we are optimistic that POGOs will be back to full capacity and will start revisiting their expansion plans,” Leechiu said.
He added that many firms with operations in China are also likely to shift their customer service operations to the Philippines.
“They will do that by importing talent from China to operate from the Philippines following the POGO operating model,” Leechiu added.
Apart from the potential demand from the IT-BPM and POGO sectors, Leechiu cited improving investor and public confidence as another factor that would help bring up office demand by the end of the year.
“Popular support for economic stimulus packages such as the Corporate Recovery and Tax Incentives For Enterprise Act (CREATE) which cuts corporate income tax from 30 to 25 percent, has boosted investor and public sentiment since the lifting of the ECQ,” Leechiu said.
Moreover, Leechiu sees new office stock to be less than initially projected due to limited work capacity.
He emphasized that while construction has already resumed in current office projects, work capacity may still be at 50 percent due to the imposition of social distancing and the deployment only of a skeleton workforce.