IT-BPM to spark Phl post-pandemic recovery in 2021

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Despite massive disruptions caused by COVID 19 and the untimely departure of online gaming firms in the second quarter, the Philippine office market registered demand of 381,000 sqm., according to a recent media briefing by Leechiu Property Consultants (LPC).

The IT-Business Process Manufacturing (IT-BPM) segment accounted for 182,000 sqm. of that total, making it one of the few markets in the world that has remained viable. Sixty-nine percent of demand was in Metro Manila and the balance of 31 percent mostly in the cities of Iloilo and Cebu. Moreover, pipeline demand for 2021 or total live requirements is estimated at 300,000 sqm.

The 2020 dip in annual demand was largely owing to new Chinese and local government measures imposed on POGOs in the second quarter, and businesses displaced by the pandemic. By the fourth quarter, vacated spaces registered at 540,000 sqm. with 51 percent or 277,000 sqm. attributable to POGOs and 33 percent or 179,000 sqm. from other players struggling to recover from COVID losses. Nevertheless, rents are holding up owing to the presence of IT-BPM firms and multinationals.

The Leechiu Property Consultants report estimated losses at P1.4 billion in office rent mostly in Makati, Quezon City, and the Ortigas-Mandaluyong area from recent POGO vacancies. However, LPC CEO David Leechiu forecasted that at least 56 percent of spaces they vacated would lure expanding IT- BPM firms since these were PEZA accredited and eligible for tax incentives. Moreover, 82 percent of the aforementioned spaces are 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,” observed Leechiu.

He further noted that new IT-BPM friendly centers like Iloilo City are attracting more outsourcing firms. In 2020, for instance, Iloilo accounted for the largest share outside of Metro Manila of new office transactions 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. new leases. Until this year, Cebu was the second most popular BPO expansion area.

The retail sector is also showing signs of increasing activity. From the second quarter when lockdowns were implemented in full force, retail sales have bounced back in the third quarter with food and specialty retailers having recovered from 47 percent to 75 percent of sales in pre-pandemic times. In fact, 76 percent of ground floor retail spaces are now fully occupied by tenants in the food and service industry.

In the residential sector, second homes mostly in Nasugbu seaside communities are selling briskly. Now more accessible physically and virtually through new highways like CALAX and CAVITEX and high-speed internet, these gated subdivisions have become havens for high net worth individuals seeking to escape Metro Manila’s dense business districts. Prices of prime lots in Tali Beach, Kawayan Cove and Peninsula de Punta Fuego have risen from 20 percent to 71 percent since the pandemic. There has also been increasing demand for hilltop homes in Tagaytay.

On the other hand, residential condominium units in strategic locations in Metro Manila, the epicenter of COVID 19, remained attractive to buyers. In 2020, 42,500 units were sold and another 12,000 units launched. With the news of the vaccine and a sustainable low-interest rate environment, developers look forward to more launches and a more active residential market.

The Leechiu study also noted that tourism would likewise boost the economy in phases beginning with domestic tourism in the form of road trips to favored destinations through newly opened highways totaling 146.7. km. mostly in Luzon – one of the largest injections of infrastructure in recent history.

A second phase still focused on domestic tourism would see locals flying to favorite vacation spots like Boracay and Palawan and a third phase would see the return of international tourists, drawn by a host of international awards citing Philippine destinations and prodded by the 12 international airports now operating within the country including Davao and Iloilo which are being upgraded.

“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. A confluence of factors – from record-low, long-term interest rates, to the country’s fantastic fiscal fundamentals that have resulted in good credit ratings, to newfound mobility and tourism opportunities from a massive injection of infrastructure projects– will ensure that,” noted Leechiu.

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