As the country’s property sector is expected to deliver a stellar performance in 2020, the Philippine Offshore Gaming Operators (POGOs) and business-process outsourcing (BPO) will be the growth drivers in the country’s office market in this year.
In a recent press briefing, Lobien Realty Group (LRG) Chief Executive Officer Sheila Lobien said the POGO companies occupy 36 percent while BPO occupy 30 percent of the total take-up in Metro Manila in 2019.
“LRG projects that office space demand by these companies will continue to increase in 2020. The Philippines’s IT-BPM industry is projected to have a potential for a 6-percent to 7-percent growth in number of headcount from 2019 to 2022 because of sustained and improved privately initiated upskilling programs combined with government support through Philippine Economic Zone Authority [Peza] and infrastructure buildings,” Lobien explained to the reporters.
Right now, LRG said seven Metro Manila cities offer letter of no objection (LONO) permits to offshore gaming. These are Makati, Parañaque, Pasay, Mandaluyong, Las Piñas, Muntinlupa and Quezon City. Moreover, there are provincial hubs operating in Subic, Cagayan, Cavite, Cebu, Iloilo, Clark, Laguna and Nueva Ecija.
POGOs contributes 3 percent to the country’s gross domestic product and expects to generate P24 billion a year in taxes. In terms of office space, POGOs have occupied a total of 1.14 million square meters since 2016.
Meanwhile, the BPO sector has a potential to grow 6 percent to 7 percent from 2019 to 2022. Furthermore, the sector recorded an increase of 5.3 percent in headcount in 2016 to 2018.
In Metro Manila, Makati emerged as the biggest district in terms of current supply as of 2018 with a total of 2,410,120 square meters followed by Taguig with 2,188,122 square meters, and Pasig ranked third with 1,264,088 square meters.
“Makati remains the most popular business district in the country,” Lobien said.
Being the country’s premier financial center, Makati is accessible via multiple modes of transportation, home of the biggest multinational corporations, and provides quality food and services that cater to the relentless demand of city’s residents and work force.
As far as the availability of future supply is concerned, Quezon City has the biggest with 485,438.94 square meters with Pasig City coming second with 406,583,44 square meters and Taguig coming in at third with 335,733,63 square meters.
Moreover, Lobien reported that Metro Manila office market posted an increase of 4.084 percent as it hit 1,034,825 square meters in 2019 as compared to 994,218 square meters in 2018. Average rent in Metro Manila rose 9.43 percent to P1,160 per square meter in 2019 from P1,060 per square meter in the previous year.
As the economy continues to post growth, more office spaces are needed. In 2019, 71 percent of the total office space supply of 1,034,825 sq m in Metro Manila was leased at an average cost of P1160 per sq m and only 4.05-percent vacancy was recorded for office spaces located within Metro Manila’s central business districts.
Lobien said LRG expects a 10 percent year-on-year in the flexible/serviced office spaces area as they are getting popular especially on the younger work force. She said regional heavyweights, such as Cebu and Davao, will continue to grow as the government implement an ambitious infrastructure development program.
Flexible and co-working spaces attract a big number of entrepreneurs because they are in a prime location in competitive areas, have a sense of community and crowdsource support services, popular among the 1.3 million Filipinos who are freelancers and large number of MSMEs, flexible in agreement period, aligned with the changing tech and business environment, and access to pay-as-you-use facilities.
Demand drivers come from start-up companies, freelancers, entrepreneurs, and digital nomads and remote teams.
Real-estate expansion
LRG Manager JM Figurasin noted residential real-estate market will continue to expand as 376,000 condominium units were completed in Metro Manila as of the fourth quarter of 2019 and an additional 15,500 units are expected in 2020. The majority of the condominium units are geared toward the mid-end market and cost P6 million to P9 million. Prices for residential condominium units are expected to increase by 5 percent to 6 percent yearly from 2020 to 2022. “LRG expects that high demand from local and foreign nationals will continuously sustain the take-up of residential units,” he said.
LRG Associate Director Steph Ng said the retail real-estate market will grow more than 1 million sq m of gross floor area (GFA) for shopping malls from 2020 to 2022 across the Philippines as property mall developers remain confident. She added the rapid growth of e-commerce in the country will lead to a fusion of e-commerce and physical malls as both these realities are here to stay. “Evolution is the key to success for the segment as new approaches to retail sales must be explored to complement the rise of e-commerce,” Ng explained.
LRG Manager Enrico Isla said the tourism real-estate market will also grow as foreign tourist arrivals increase every year. Last year, 6.1 million foreign tourist arrivals were recorded as of September, a 14-percent increase from the same period in 2018. “To cope with the demand for rooms, 3,500 rooms will be added to the current supply by 2021. In 2019, hotels in Metro Manila had an overall occupancy rate of 74 percent as of the third quarter,” he said.