THE demand for Philippine office spaces more than doubled to 255,000 square meters (sq.m.) this quarter from end-March, the highest since the coronavirus pandemic forced workers to stay and work from home in 2020, according to Leechiu Property Consultants.
“The office segment remains resilient,” Mikail C. Barranda, director for commercial leasing at the property firm, told an online news briefing on Wednesday. “We have a healthy pipeline of live transactions of 451,000 sq.m.”
Lease transactions have reached 379,000 sq.m. this year, almost 70% of the full-year take-up in 2021, Leechiu said in a report.
Outsourcing companies drove the demand for office spaces this quarter, accounting for 42% or 107,000 sq.m., Mr. Barranda said.
A number of outsourcing companies shed office spaces at the height of the pandemic that has killed 6.4 million people worldwide, as workers shifted to working from home.
Office demand in 2020 sank to 381,000 sq.m. from 1.7 million sq.m. in 2019 when the world was still coronavirus-free, according to data from Leechiu. Last year, it was 539,000 sq.m.
Leechiu earlier said office space demand would pick up as lockdown restrictions ease and many companies issue back-to-office orders.
The business process outsourcing industry was worth $361 billion in 2020, according to the World Bank.
The sector contributes almost $30 billion to the economy each year, and about 1.3 million Filipinos were employed in more than 1,000 outsourcing companies in 2019, according to Nexford University.
The Philippines holds 10-15% of the global BPO market and its services are oriented to its former colonial power, the US, and also serve Europe and nearer neighbors Japan, New Zealand and Australia, it said.
“All the leasing activities in the past three months, from many new captives and companies doing business here for the first time, tell us that outsourcing to the Philippines continues to be a reliable solution for companies in the West fighting an impending global recession,” he added.
On the other hand, vacant office spaces rose by 63% to 170,000 sq.m. as a number of Philippine Offshore Gaming Operators (POGOs) — mostly Chinese gambling companies that operate online — were shuttered. These companies used to occupy 64,000 sq.m. of these spaces, Leechiu said.
“Continued POGO contractions indicate fluidity in this industry,” Mr. Barranda said.
He said 18% of office spaces in Manila, the capital and nearby cities were vacant, with Bonifacio Global City (BGC) in Taguig and Makati City both having “manageable vacancies” at 12% and 14%, respectively.
Meanwhile, capital values and interest in key business districts increased past pre-pandemic levels, particularly in BGC and Filinvest City in Muntinlupa.
Filinvest City reported the highest growth rate among business districts in the capital region with a compound annual growth rate (CAGR) of 20% over a six-year period.
In the residential segment, condominium sales rose by 54%.
“Demand for most segments posted significant growth as developers offered extended and flexible payment terms and investors purchased residential units to lock in current prices,” Roy A. Golez, director for Research and Consultancy at Leechiu, told the same briefing.
He added that with rising consumer prices, interest rates are likely to increase and affect the market.
“Such a development may impact not only the lower middle residential condominium segment but also the middle-income category, which is now also being confronted by looming economic headwinds,” Mr. Golez said.
“This chain of events, nevertheless, has not dented residential lot prices, especially Southern Mega Manila properties which have become more accessible through new expressways and other infrastructure,” he added.
Leechiu said Philippine real estate would continue to grow amid healthy capital values, avid residential investors and an office market firmly supported by the information technology-business process outsourcing sector.
“As the economy opens up, we are confident that transactions especially in the office sector will pick up, driven by firms that will use outsourcing in tough times,” Mr. Barranda said.
“The IT-BPM sector is the unique Philippine industry that does well when everyone else in the world is challenged to remain viable,” he added.
In a related development, Manila was the 122nd most expensive city in the world for expatriates, according to Mercer’s 2022 Cost of Living Survey, down 44 places from 78th a year earlier.
The Philippine capital was in the lower half among 227 cities in the survey, which compares the cost of more than 200 items in each location such as housing, transportation, food, clothing, household goods and entertainment.
“Manila was ranked 122nd in this year’s ranking primarily due to higher inflation/prices in the Philippines and also a weaker peso, that weakened against the US dollar,” Mercer Asia-Pacific Regional Mobility Leader Tracey Ma said in an e-mail interview with BusinessWorld.
Four of the top 10 most expensive cities were in Asia — Hong Kong (1st), Singapore (8th), Tokyo (9th) and Beijing (10th).
Mercer said this year’s survey included new items such as smartwatches, tablets, computers and smartphones, while nonrelevant items such as music CDs and video movie rentals were removed as part of efforts to stay up to date with the spending patterns of the expatriate workforce.
“Despite the relatively lower inflation in Asia compared to the rest of the world, high prices and strong currencies with the exception of Japan and Korea continue to propel Asia as one of the most expensive regions for international employees,” Ms. Ma said in a statement.
“In the past months, the strength of the Chinese Yuan has also made Mainland China pricier to live in,” she said. “Six of the main cities — Beijing, Shanghai, Shenzhen, Guangzhou, Qingdao and Nanjing — are among the top 10 most expensive cities in Asia. In contrast, Japanese and Korean cities have become relatively more affordable due to a weaker Japanese yen and Korean won,” she added.
Manila’s lower ranking was probably due to falling property prices, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.
“This may largely reflect the downward correction in property prices and rental rates since the pandemic as the country experienced one of the longest lockdowns and some Philippine Offshore Gaming Operators exited the country due to the pandemic and also due to higher taxes and increased regulation,” he said in a Viber message.
“The lockdowns resulted in some business closures and some job losses, leading to lower property prices and lower rental rates especially at the height of the pandemic,” he added.
Ms. Ma said economic and political uncertainties have resulted in higher living costs even in developed and stable markets across Asia.
“While the onus is on employers to act quickly to attract and retain key talent, they need reliable data and clear strategies to navigate mobility packages in times of uncertainty,” she said. “This will help to ensure their employees’ financial well-being as well as business efficiency and equity.”
Mercer said the 2022 survey was affected by rising inflation in developed economies, adding that companies were now facing the challenge of ensuring that the spending power of mobile employees were unaffected as travel and international mobility resume. — Luisa Maria Jacinta C. Jocson and Revin Mikhael D. Ochave