Office space sector continues to show resilience
DESPITE the overall gloomy scenario in the economy, the office sector continued to show resilience as it posted new demand in the first quarter registering a 109,000 sq.m, up by 68 percent from 65,000 sq.m in the third quarter of last year.
In a press briefing, Leechiu Property Consultants Inc. (LPC) expressed optimism saying that companies are “thinking long term and are preparing to go back to the office. LPC said the information technology-business process
management [IT-BPM] sector emerged as the biggest space taker with 33,000 sq m followed by e-commerce at 19,000 sq m, which tripled its take-up from its fourth-quarter level of 6,000 sq m. “E-commerce is proving to be a sunshine industry,” LPC Chief Executive Officer David Leechiu said.
Moreover, LPC also said active office requirements of 266,000 sq m are needed by companies within the year. Aside from the IT-BPM sector, the sectors that are looking for space are the Philippine Offshore Gaming Operators (POGOS), 12 percent; and retail firms, 7 percent. “Despite the hardships the retail industry has experienced we are seeing companies adapt, innovate and commit to space in anticipation of a recovery,” Mikko Barranda, associate director noted.
He also added that POGOS again expressed interest with a requirement of 31,000 sq.m. Although it is still premature to determine if POGOS still want continue operating in the country, Leechiu said crafting a coherent policy of POGO operations and taxation would be a
good factor to entice them to stay.
On the supply side, Barranda said the current vacancy rate across Metro Manila is 11 percent or 1.4 million sq m., with the biggest vacancies in Quezon City and Ortigas. “But it is worth noting that the vacant spaces are spread or fragmented across 330 buildings. Of that total, only 40 buildings have vacancies larger than 10,000 sq m,” Barranda explained.
There is no doubt that the figures are a far cry from the sector’s pre-pandemic performance. However, Leechiu sees a silver line as the property sector appears to be on a rebound. Overall, the pace of office contractions has slowed down by 19 percent from the fourth quarter of 2020, which is getting strong support from the IT-BPM and corporate occupiers.
Meanwhile, POGO contractions have leveled off to118,000 sq m—a figure close to their fourth quarter of 2020 contraction of 114k sq.m and Q3 2020 contraction of 116k sq m.
Based on their study, LPC said the trend of decreasing contractions supported by quarter-on-quarter increases in office demand were signs of improving investor confidence.
Residential sector
MEANWHILE, the residential sector is also on the path to recovery since the third quarter of 2020. According to LPC, demand grew in the third quarter and increased once more in the succeeding first quarter of 2021 by 5.7 percent in terms of unit sales, Tam Angel, the associate director reported.
Tam said the upper-middle to luxury segment remained stable and showed significant growth. nevertheless, the demand in the mid-income and lower segments would be affected because of the stricter 2021 quarantine measures from March 29 to April 30 (MECQ).
Angel added that demand is expected to pick up as interest rates continue to decline, which will be an opportunity to help support the residential sector and will provide greater access to funding for investors across the board.
Despite the overall bearish sentiment prevailing in the country, LPC said capital values have remained steady as developers were quick to adjust to launching new projects to maintain market velocity. On the other hand, rents softened owing to the lockdowns and quarantine restrictions. nevertheless, the market view over the long-term supports recovery and growth, thus depreciation in prices is expected to be temporary.