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Waiting for the great return: Six recommendations for office landlords

Office real estate, Office market in Metro Manila, Office market in the Philippines, Office landlord, Landlord Representation

While the back-to-office plans of many companies may have been delayed by the Omicron variant of Covid-19, it does not mean that landlords will just sit tight and wait for clients to come knocking at their doors. These recommendations may be just the thing landlords need to close that next big lease contract.

 

The last two months of 2021 boded well for the Philippines’ effort to curb Covid-19. Cases dipped to three digits by the last week of November and continued until after Christmas. Metro Manila and the rest of the country lowered its Alert to Level 2, which meant most people including children were now allowed to visit malls and other public places. The country’s largest mall developer and operator, SM Prime, reported that foot traffic in some of its malls exceeded pre-pandemic levels. In the office real estate sector, many companies have started to plan their back-to-work strategy, most of which were initially scheduled in the first quarter of 2022.

Unfortunately, the Omicron variant of Covid-19 has thrown us another curve ball. Although initial studies have shown Covid-19 cases caused by the Omicron variant are “milder” than previous strains and less likely to lead to severe outcomes, this variant’s ability to spread more easily and evade immunity from vaccinations and previous infections is a cause for concern, especially for the elderly and immunocompromised individuals. This variant has quickly become the dominant strain in many countries, leading to record-high case numbers and business disruptions. On January 15, 2021, the country recorded a daily tally of 39,004 Covid-19 cases, the highest since the start of the pandemic. Even with “mild” cases of Covid-19, a high volume of infections has its own set of challenges, including the possibility of business disruptions when companies experience outbreaks in the workplace.

However, there is still room for cautious optimism. Studies have shown that the rise in Covid-19 cases due to the Omicron variant may not necessarily increase hospitalizations and deaths. South Africa, for example, may have seen cases surge due to the Omicron variant, but death rates were below the rates recorded during the Delta surges in July and August 2021.

Indeed, with a wide vaccination coverage, mask mandates, social distancing, and other health protocols in place, the Philippines is well positioned to overcome the severe impact of the Omicron variant.

Maricris Sarino-Joson, Director of Office Services – Landlord Representation at Colliers, believes that developers should prepare for office space demand recovery and employees’ return to traditional offices. “We have seen disruption due to the Omicron variant of Covid-19, but we believe that office landlords should always be on the lookout for opportunities now and beyond 2022.”

According to Sarino-Joson, the Omicron variant should not hinder the property market’s recovery and the much-anticipated rebound of the Philippines’ office real estate. While the country battles a Covid-19 surge and new restrictions are imposed, landlords must now take action to prepare their properties for the eventual and inevitable return to work.

Colliers has put together a list of recommendations for landlords in order to ready their properties for the return of workers.

1. Introduction of technology to combat the virus in the workplace

There are many ways for office landlords to retrofit their properties to make them safer for users and occupants, one of which is introducing touchless access in ingress/egress points, restrooms, elevators, and common areas. This strategy helps safeguard against the spread of Covid-19 and other viruses on surfaces. Among the strategies that landlords can implement include hands-free door unlock mechanisms, virtual guest passes, and automatic door openers.

Other technological innovations that landlords can implement include disinfection and sanitation equipment at the entry to the property; improving air quality by upgrading air-conditioning systems and introducing filtered fresh air into the building; treating surfaces with antiviral coating to prevent transmission from high touch surfaces; and the use of negative air ionization systems to suppress airborne viruses and microbes.

2. Assist tenants with renovations to reflect social distancing requirements

Our offices may look vastly different after the pandemic. This is because a lot of safety and health guidelines may need to be introduced in order to protect the well-being of office workers. This may involve adjustments on design and fit-outs to accommodate new social distancing norms, distribution of more space among fewer people, and incorporating elements from hospital design to the office setup, such as easy-to-clean and -disinfect floor finishes, furniture, curtains, and door handles. For occupiers to achieve this they need their landlords’ support and that means flexibility in providing fit-out periods in order to implement these much-needed changes.

3. Maximize available fitted spaces to meet occupiers’ immediate requirements

Some landlords may also convert spaces within their buildings into fully fitted swing spaces (or temporary office spaces) and offer these to their existing tenants while the latter wait for their permanent offices to be built or renovated. Landlords may even partner with service facilities providers in order to convert these bare spaces and market them to potential clients.

4. Stage them properly

One way to improve the marketability of vacant spaces is to stage them properly. Just as homebuyers will not be able to imagine themselves in an empty house, when you show an empty office, occupiers will not appreciate its best features. Providing them with a photo of a well-designed office will give them the chance to love the place and see their business set up in this nice working environment.

5. Accept short-term leases to chase occupancy and cover operational expenses

Given the current market situation, landlords may consider short-term leases to at least cover the cost of running and maintaining the property. Accepting short-term leases may also open doors to new and previously untapped clients, such as start-ups, which can potentially become your long-term clients in future.

6. Provide better commercial terms for long-term leases

Finally, if landlords do manage to find occupiers willing to sign long-term leases, deals can be further sweetened – and relationships strengthened – by providing better commercial terms and offering concessions, such as flexible lease terms, partial termination options, and delayed escalation, among others. Show the prospective tenant that bigger cost savings can be achieved by longer commitment in the property.

Although the current situation we find ourselves in may not be the most ideal, there are still plenty of opportunities out there. Colliers encourages landlords to be proactive in offering add-ons to their commercial terms in order to make them more attractive to prospective tenants. We also urge them to work amicably with occupiers as we all survive and thrive during this pandemic.

 


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Maricris Sarino

Director

Office Services Landlord Rep

Manila

Maricris has worked in real estate since 1998. She began her career as an Investment Consultant in Megaworld Corporation handling the leasing of Megaworld's office buildings, residential condominiums and commercial warehouses. In 1999, Maricris was tasked to conceptualized, set-up and operate the Eastwood Locator’s Assistance Center (eL@C) in Eastwood City CyberPark, the first ICT, mixed-use master-planned city in the Philippines. eL@C serves ICT and BPO companies as an one stop shop for real estate solutions, information center as well as a business center facility and headquarters for service providers and satellite government offices.

Maricris joined Colliers International in 2012 to provide real estate strategies and solutions to its current clients as well as to source new clients for the company.

In addition, Maricris founded the Children's Environmental Awareness and Action Foundation (CEAAF) that focuses on the development and implementation of programs and educational materials on Philippine flora and fauna as well as Filipino pride projects and events.

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Daniel Salapong

Senior Manager

Office Services

Manila

Daniel is a Senior Manager for Landlord Representation (LR) under the Office Services Team.  He started in Colliers as part of the Tenant Representation team and transitioned to his role in LR – now marketing the different projects in the Colliers portfolio.

As a Senior Manager, Daniel is tasked to provide customized solutions to accelerate the success of our clients, and fully lease out assigned projects, office spaces, buildings in partnership with developers and owners.

Throughout the leasing process, clients will be able to benefit highly from his valuable insights and recommendations providing them the service excellence Colliers is known for.

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