The prolonged coronavirus pandemic will continue to exact a toll on people and businesses, but amid the rubble, the property sector is in a good position to rebound in 2021, property consulting veteran David Leechiu said.
“The property market has been extremely resilient—one of the most resilient in the world and it’s sustained by a cocktail of many good fundamental events happening at the same time that is leading us to a recovery,” Leechiu, founder and president of Leechiu Property Consultants (LPC), said at a press briefing on Tuesday.
He said he was confident that the sector would minimize destruction from the pandemic as well as the untimely exodus of some Philippine offshore gaming operators (Pogos) as a result of pandemic-related lockdowns and a more challenging regulatory environment.
About P1.4 billion worth of office rental income had been lost this year due to the pullout of some Pogos, whether as a result of lockdowns, higher taxes or the intensified crackdown by regulators in China where gambling is illegal.
“We have every confidence that the rollout of the vaccine in 2021 will create unprecedented market euphoria that will dramatically benefit the real estate industry,” noted Leechiu.
Despite all the constraints this 2020, the Philippine office market saw 381,000 square meters of office property demand, of which 182,000 sqm were from the information technology-business process management (IT-BPM) segment, proving that the Philippines was one of the few viable markets in the world for this space, Leechiu said.
Sixty-nine percent of demand was in Metro Manila and the balance of 31 percent mostly in the cities of Iloilo and Cebu. For 2021, the country has a pipeline of 300,000 sqm in live requirements.
By the fourth quarter, there were 540,000 sqm of vacated office space in the country, 51 percent of which were attributable to exiting Pogos and 33 percent to other players struggling to recover from pandemic losses. Nevertheless, rents are holding up owing to the presence of IT-BPM firms and multinationals.
The estimated losses of P1.4 billion in office rent from Pogos were mostly in Makati, Quezon City and the Ortigas-Mandaluyong area. However, Leechiu said at least 56 percent of vacated space would lure expanding IT-BPM firms since these were Philippine Economic Zone Authority (Peza)-accredited and eligible for tax incentives. Moreover, 82 percent of vacated offices were in Metro Manila, a primary destination for BPO firms.
“Developments in the last two quarters have created compelling opportunities for IT-BPM players. We are thus confident that they will continue expanding in the country, which remains a leading outsourcing arena for global businesses now seeking to cut costs and recover from COVID losses,” said Leechiu.
New IT-BPM friendly centers like Iloilo City are seen to attract more outsourcing firms. In 2020, for instance, Iloilo accounted for the biggest share of new office transactions outside Metro Manila at 50,000 sqm owing to its highly skilled labor force and new Peza office inventory. It overtook Cebu City, which posted 37,000 sqm in new leases.