Despite the coronavirus pandemic-prompted lockdown measures in most parts of the country in the second quarter, Philippine office property leasing activities picked up pace as demand from the business process outsourcing (BPO) sector compensated for the slump in the Philippine online gaming operator (Pogo) space.With the Philippine office market continuing to grow, albeit on a quarter-on-quarter basis, this makes it a rarity in this pandemic-stricken planet, leading real estate consultancy firm Leechiu Property Consultants (LPC) said in a research note issued on Monday.
From the first to the second quarter of 2020, LPC reported that new leases increased by about 50 percent, or 77,000 square meters, with 42,000 sqm absorbed by the information technology-business process management (IT-BPM) sector. Despite being a new COVID-19 hot spot, Cebu was the single biggest recipient of new office demand at 40 percent.However, LPC noted that second-quarter office vacancy rate had increased to 8 percent from 6 percent in the first quarter as some 89,000 sqm of office space turned vacant. Pogos accounted for 54 percent of the newly vacated space while the IT-BPM sector accounted for 12 percent.“Tax regulations and movement restrictions curtailed Pogo growth and, in some instances, led to contraction,” LPC said.
In summary, 234,000 sqm of office space were taken up in the first semester, while 89,000 sqm were vacated, resulting in a net absorption of 145,000 sqm.
“The Philippine office segment has not yet entered a point of contraction,” said LPC chief executive officer David Leechiu, observing that the IT-BPM and Pogo sectors would continue to be two major pillars of growth.
Compared to the first semester of 2019, however, office space take-up this year decreased by 74 percent. LPC thus recalibrated its total office demand forecast to hover at the 600,000 to 800,000 sqm by year-end.
Leechiu estimated that local office requirements this second semester would hit around 482,000 sqm, 68 percent of which would be from the IT-BPM and Pogo sectors.
With the pandemic bringing local unemployment rate to an all-time high, Leechiu recommended more support for IT-BPM and Pogo sectors, citing these as the fastest-growing job generators.
“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,” Leechiu said.
In April 2020, the Philippine Statistics Authority reported that a total of 7.3 million Filipinos have lost their jobs due to COVID-19.On the residential sector, LPC reported that the Metro Manila condominium market remained active despite the pandemic.
The upscale segment, defined as those who can afford to pay for P7 million to P12 million per residential unit, expanded, partially making up for declining revenues from the middle-income bracket, or those who can pay for P1.4 million to P12 million worth of residential units.The middle-income segment has been affected by overseas Filipino job displacements alongside local job losses. About 26,000 residential units were sold in the first half of the year, of which 13,278 units were taken up in the second quarter, 2 percent better compared to the first quarter of this year.Capital values in major central business districts for both primary and secondary units softened by 5 percent to 10 percent. Large developers remained firm about pricing levels and instead offered cash discounts, lower reservation fees and down payments, and flexible payment schemes, LPC said.
Most property owners in high-end gated villages appeared to be holding to their assets for capital preservation purposes, LPC observed. Owners who do sell at a discount would likely be in need of immediate cash.
Despite the looming negativity, LPC is optimistic that Philippines will have a rapid economic recovery within the next six to 12 months, citing the government’s strong fiscal position, the completion of 11 infrastructure projects that can ease traffic by 50 percent, fund flows from the fiscal stimulus of the world’s largest economies, slowdown in interest rates, growth in BPO sector, resurgence in domestic consumer spending, and eventual rebound of tourism. INQ