Recovery seen in office space demand this year
Bright prospects are seen for the country’s office market this year amid the growing demand for office spaces in provincial locations as well as the improving business confidence in the country, according to Santos Knight Frank (SKF).
SKF senior director for occupier services Morgan McGilvray said in a virtual press briefing that one key driver of office demand in the Philippines now is companies looking to go out to the provinces.
“It’s not just Metro Manila anymore. It’s not just Metro Cebu anymore. Provincial locations such as Iloilo, which has been quite popular for a while now, but also Davao is coming on very strongly. We’re seeing a lot of activity in Bacolod recently as well. And then Clark, which has always been a popular provincial destination,” McGilvray said.
“So the demand is not all concentrated in the tier one cities anymore. We’re starting to see a lot in the provinces as well,” McGilvray added.
Meanwhile, McGilvray noted the continuous business confidence in the market, which is also seen to positively impact office space demand in the country.
According to him, this means more companies are feeling confident to go ahead and make investments, and set up new offices in the Philippines and grow in the country.
“We did not see so much business confidence during the pandemic for obvious reasons. But now, things look good locally,” McGilvray said.
“The perception of the Philippines abroad continues to get stronger and get better and that’s usually a leading indicator that the office market is going to pick up again and that’s why we’re so optimistic about 2023,” he added.
The SKF official also expressed optimism for more leasing activity in the office sector this year, driven by the business process outsourcing (BPO) sector.
“We expect more leasing activity this year as a result of greater outsourcing requirements from developed economies, the availability of quality office space, and companies adjusting their work setups,” McGilvray said.
“While we will continue to see some downsizing of footprints for Philippine headquarter companies, we still expect to see an overall net positive take up in 2023 driven mainly by the BPO sector,” he said.
Apart from the office market, SKF sees a rosy outlook for the Philippine property market this year driven by sustained demand in the retail, hospitality and industrial sectors..
“After a positive Q4 2022 performance, the industry’s recovery is expected to accelerate in 2023, propelled by a resilient and stable economy and by the sustained growth of OFW remittances and household spending, weathering headwinds such as interest rate hikes and inflation,” SKF said.
“As markets recover, Santos Knight Frank also believes that the Philippines is now much better positioned to attract investments from overseas, with companies from the US and other countries confident with the Marcos administration, “it added.
The property services firm added that the passage of reforms supporting investments is also drumming interest for the country, which is crucial for sustained recovery and growth. Among these are the Foreign Investments Act, Public Services Act, and Retail Trade Liberalization Act.