Office demand hits highest level since 2020

Philippine office demand in the second quarter registered at 255,000 square meters, the highest among all the quarters since the start of the pandemic in 2020, according to the June 2022 report by Leechiu Property Consultants (LPC).

Office take-up surged by a hefty 106 percent from the first quarter’s 124,000 sqm., suggesting a stronger growth momentum, said LPC director for Commercial Leasing Mikko Barranda.

Year-to-date leasing transactions are now at 379,000 sqm., or already 70 percent of 2021’s full year take-up.

Demand in the second quarter continued to be driven by IT-Business Process Management firms which accounted for 107,000 sqm., with majority of the deals in Metro Manila.

Philippine Offshore Gaming Operators (POGOs) likewise took up 21,000 sqm., the first sign of leasing activity from this industry since March 2020.

“This can best be interpreted as tentative steps for now,” said Barranda.

“All the leasing activity in the past three months – from many new captives and companies doing business here for the first time– tell us outsourcing to the Philippines continues to be a reliable solution for companies in the West fighting impending global recession.”

The likelihood of the Philippine office market climbing to higher pre-pandemic levels was further boosted by year-to-date live requirements of 451,000 sqm. in various stages of completion as of mid-year. Again, IT-BPM firms lead live requirements with 212,000 sqm. of the total.

The LPC study showed that IT-BPM headcount from 2019 to 2021 grew by 15 percent. At the height of the pandemic in 2021, as many as 120,000 full-time employees were hired. And even if many firms had adopted hybrid set-ups with a portion of employees working onsite and another portion working-from-home, they still continued to take up office space albeit at a more modest rate.

RESIDENTIAL

Residential condominium sales posted strong recovery rising by 54 percent from the first quarter to the second quarter of the year, according to Roy Golez, director for Research and Consultancy.

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.

The lower middle segment bucked the trend, dropping by 89 percent as buyers at that level opted to prioritize purchasing necessities over the security of owning a home. New launches likewise slowed down by 78 percent given uncertainties like increasing interest rates, inflation and construction materials procurement issues due to lockdowns in source countries.

Overall, Philippine real estate continues to be a growth story supported by healthy capital values, avid residential investors, and an office market firmly supported by the IT-BPM sector.

Said Barranda: “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. The IT-BPM sector is the unique Philippine industry that does well when everyone else in the world is challenged to remain viable.”

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