Office space take-up slows
TAKE-UP OF office spaces in Metro Manila slowed down by more than a fifth during the second quarter of 2018 as information technology-business process management (IT-BPM) firms took their expansion plans on hold due to uncertainties in securing accreditation from the Philippine Economic Zone Authority (PEZA).
This is according to real estate consultancy Pronove Tai International, which reported on Thursday that the spaces taken up by firms for the April to June period went down by 22% to 214,000 square meters (sq.m.) from the 262,000 sq.m. actual take-up in the previous quarter.
Traditional companies drove the demand during the period, taking up 43% or 92,000 sq.m., outpacing the IT-BPM sector which was previously the top driver for office spaces in the metro.
IT-BPM firms accounted for 32% or 69,000 sq.m., marking a 100% decrease from the sector’s actual take-up of 135,000 sq.m. in the first quarter of 2018.
“The expansion (of IT-BPM) is not impressive as it was before. The basic fact of why they are here is the quality of service that we offer, however there’s these uncertainties of whether the PEZA is still significant,” Pronove Tai Chief Executive Officer Monique CornelioPronove said in a quarterly briefing in Makati yesterday.
PEZA grants fiscal and non-fiscal incentives, such as income tax holidays and exemption from limitations in the employment of foreign nationals, to locators in IT parks such as business process outsourcing firms. Delays in the approval of such accreditations have hampered expansion of BPO firms in the country.
“We don’t see PEZA coming up with accreditations at least in Metro Manila. Of course there’s a focus on decentralization, but we have not seen a number of them being proclaimed,” Ms. Cornelio-Pronove said.
In addition, the proposed second package of the Tax Reform for Acceleration and Inclusion (TRAIN) law is set to diminish PEZA powers to that of a “registry for investments,” as the pending tax reform program looks to centralize all incentive approvals through the creation of a Fiscal Incentives Review Board.
Ms. Cornelio-Pronove said the government would have to “ensure a stable and predictable business environment” to restore the IT-BPM sector’s confidence in expanding in the Philippines.
Meanwhile, Philippine offshore gaming operators (POGOs) expanded to 51,000 sq.m., higher by 6% quarter-onquarter. While the Bay Area and Makati City are still the most preferred locations by POGOs, Pronove Tai said the lack of supply in the area are pushing them toward Las Piñas and Pasig City, which now hold 5% and 6% of the total office stock occupied by POGOs, respectively.
Flexible workspaces provided the remaining 2,000 sq.m. of the office take-up for the quarter.
Amid the slowdown in take-up of office spaces, the amount of supply that came online during the quarter also dropped by 30% versus the previous year.
“What’s happening right now is there are some developers who are slowing down their construction schedule, because they see a 22% drop (in take-up). You are very uncertain if you want to have POGO or not. So at this point, they are also slowing down on the supply side,” Ms. Cornelio-Pronove said.