Here’s a compilation of Meaningful Insights from our Office Services – Tenant Representation experts.
Several provinces in the Visayas and Mindanao were severely affected by Typhoon Odette, including Cebu. The province dealt with power outages, damaged utility poles, and inoperative communication lines, while various establishments, including office buildings, heavily relied on power from generator sets, creating an artificial shortage on fuel. Since many IT-BPM locators generate revenue on a per-seat and per-minute basis, these companies carried out business continuity plans (BCP) to immediately provide employees with a workspace that has Internet access and electricity. This resulted in high demand for fully fitted or “plug and play” spaces; occupiers searched for such options across Metro Cebu, while others flew their employees to unaffected cities, including Metro Manila. As the needs of occupiers evolve in the face of the health and environmental emergencies, opportunities for office services professionals to provide greater value and ensure the continuity of businesses shall also emerge.
To further liberalize the Philippine economy, lawmakers introduced amendments to two existing pieces of legislation: namely, the Retail Trade Liberalization Act of 2000 and Public Service Act of 1935. The two amendatory pieces of legislation are part of the three investor-friendly measures endorsed by President Duterte and whose passage has been advocated by Department of Finance secretary Carlos Dominguez III and the chief executive’s economic team. With these amendments, the eased restrictions and requirements for investments will attract more foreign investors, which will generate new business opportunities and economic drivers across the country. The potential economic growth to be brought by the liberalization of investment policies will also help the country recover from the Covid-19 pandemic and improve its competitive standing in attracting foreign capital.
The Covid-19 pandemic has pushed companies to reassess the use of the office as the nature of their operations and activities changed. Before the pandemic, most office spaces were designed based on functionality: desks, floor plans, and furniture were arranged on the premise that performance and productivity were directly proportionate to time spent by the employees in the office. This trend was somewhat altered when, during the height of lockdowns, many organizations transitioned to a work-from-home (WFH) arrangement. For several companies, employees’ productivity and performance remained at an acceptable level with the WFH setup. While openness towards remote work was boosted by the pandemic (perhaps out of necessity), the office remains essential for face-to-face interactions, which are still needed to cultivate culture and personal connections among employees.
Prior to the Covid-19 pandemic, the Metro Manila office market rode a wave of momentum that peaked in 2019 when 903,000 square meters of new office supply was completed and 1.5 million square meters of leasing transactions were done. But this trend was quickly turned on its head in 2020 when the pandemic forced numerous occupiers to cancel their expansion/relocation plans and surrender office space. Still, there were some bright spots in the office market as there were notable transactions driven by the flight-to-quality moves and expansions of certain IT-BPM locators and companies from industries that not only survived but thrived during the pandemic (e.g., logistics, e-commerce, telecommunications).
Following two consecutive years of negative net take-up, the Metro Manila office market appears to be turning a corner as net take-up is projected to land in the positive territory in 2022. Net take-up, which is the change in occupied space between two periods, is forecasted by Colliers to reach 307,000 square meters in 2022, a significant improvement from the net take-up of –273,000 square meters recorded in 2021. The projected positive absorption is expected to be driven by demand from traditional and IT-BPM locators. Colliers believes that the recovery of office demand will be boosted by the improved business confidence, greater vaccination coverage, and passage of several economic stimulus measures.
In response to the request of Philippine Economic Zone Authority (PEZA) to extend the 90% work-from-home (WFH) arrangement until September 12, 2022, the Fiscal Incentives Review Board (FIRB) of the Department of Finance issued a resolution last March 7, 2022, reiterating that registered business enterprises (RBE) under PEZA may only enjoy the 90-10 WFH threshold with no penalties levied towards their tax incentives until March 31, 2022. Thereafter, RBEs, particularly locators in the Information Technology and Business Process Management (IT-BPM) industry, must exclusively operate within the PEZA-proclaimed IT centers or buildings beginning April 1, 2022, in line with the respective governing legislation. The decision of the FIRB is grounded on the government’s thrust to reopen the economy and allow for more consumer activity as vaccination coverage is high and severe health outcomes have been mitigated to a significant extent.
The Philippines is poised to open the floodgates to more foreign direct investments and avenues for economic growth and recovery after the enactment of three significant pieces of legislation by Congress and the signing of an Executive Order that aims to accelerate and sustain economic growth from the Covid-19 pandemic. With the flow of investments accelerating the economic development of various areas across the country, Colliers believes that the economic opportunities created by the aforementioned amendments will have a positive cascading effect on Philippine real estate and the livelihoods of many Filipinos.