LEECHIU Property Consultants (LPC) said it expects the information technology and business process management (IT-BPM) sector to continue to drive demand over the next years, anticipating the market to hit pre-pandemic levels seen in 2016 or 2017.
According to the latest LPC study, office take-up surged in the last quarter to 74% to 160,000 square meters (sq.m.). The IT-BPM sector accounted for half of the fourth-quarter demand or 81,000 sq.m.
The office market will finish with a “strong” demand of 540,000 sq.m., 48% of which is accounted for by the IT-BPM sector.
“Given that in 2021, we haven’t seen much of the POGO (Philippine offshore gaming operators) transactions, we believe that we are aiming to look at numbers closer to 2016 or 2017,” Leechiu Commercial Leasing Director Mikail C. Barranda said in a briefing on Wednesday.
The total office demand in 2016 stood at 647,000 sq.m., while 2017 booked 868,000 sq.m.
Demand from POGOs drove the office market at all-time highs in 2019 with 782,000 sq.m. in demand out of the 1.75 million sq.m. booked and in 2018, it logged a demand of 437,000 sq.m. out of the total 1.63 million.
The 540,000 sq.m. demand seen this year is still a far cry from the level seen in 2019.
“2019, specifically, is a landmark year for the Philippine office market. We’ve never seen that much transactions ever before and that was because of the POGO industry being the dominant demand driver at the time,” Mr. Barranda said.
Unrenewed leases in the fourth quarter led Metro Manila to have an 18% vacancy rate.
“POGO hotspots” suffered the pinch with the Bay Area’s vacancy rate standing at 27%, while Quezon City is at 24%. LPC said Makati and BGC still have “manageable levels” of vacancy at 12% and 13%, respectively.
Meanwhile, LPC expects the provincial office sector to see increased demand by next year. Iloilo accounted for 41% of provincial office demand, followed by Clark/Pampanga at 15%, Davao at 12%, and Cebu and Laguna, both at 9%.
Iloilo received the second-largest demand for office spaces to host IT-BPM firms after the Bay Area.
Over the next six months, LPC said office requirements of 224,000 sq.m. “will likely conclude” and IT-BPM firms account for 132,000 sq.m.
Asked if the demand from the new hot sector will likely match the demand seen from POGOs, which spurred the office market in 2018 and 2019, LPC Chief Executive Officer David T. Leechiu said this “depends on what the next administration does.”
“I think we have every opportunity to do so,” Mr. Leechiu said in a separate interview on Wednesday, adding that more international companies have become interested in the country’s number of growing key cities as infrastructure projects continue to improve connectivity. — Keren Concepcion G. Valmonte