Property recovery seen to continue; BPOs to drive office space demand

THE PHILIPPINE property sector’s recovery is expected to continue this year, as business process outsourcing (BPO) companies drive office space demand, Colliers said on Thursday.

“For office, we are very positive. In fact, we are projecting positive net take-up. That means that the occupied spaces will outpace the vacated spaces,” Colliers Director for Research Joey Roi Bondoc told a news briefing.

For offices, Colliers expects net take-up to reach 228,000 square meters (sq.m.) this year. Net take-up reached 110,500 sq.m. in 2022, a turnaround from the negative take-up in the previous two years.

Colliers sees the office vacancy rate going up to 20.2% due to new office supply and muted take-up in upcoming buildings. As of the fourth quarter of 2022, the vacancy rate reached 18.8%.

Even with companies implementing work-from-home or hybrid work setups, he noted a substantial demand from BPO companies, particularly those from the healthcare service segment.

“And what we were positive about really is the office take-up outside of Metro Manila. They are now not just looking at Metro Manila as an ideal office location, they are expanding to Pampanga, Cebu, and Davao, among others,” Mr. Bondoc said.

In 2022, total office transactions outside Metro Manila rose to 222,000 sq.m. from 113,000 sq.m. in 2021. Colliers said 60% of provincial transactions came from Cebu.

“For the property sector in general, we need to keep an eye on interest rates… If interest rates further increase it can stifle the expansion plans of locators here in the Philippines,” Mr. Bondoc said.

The Philippine central bank raised key interest rates by 350 basis points (bps) in 2022, bringing it to 5.5% — the highest in 14 years.

BSP Governor Felipe M. Medalla earlier signaled more policy rate increases in the first quarter to ensure inflation falls within the 2-4% target by the second half.   

The Monetary Board will hold its first policy review on Feb. 16.

Meanwhile, Mr. Bondoc said pre-sales of residential condominium units have started recovering last year.

Colliers said 20,000 condominium units were sold in the pre-selling market in 2022, better than 13,300 units sold in 2021.

“Colliers believes that demand in the pre-selling market should partly be sustained by the continued inflow of overseas Filipino workers’ (OFW) remittances,” it said.

Developers should also further test the market for luxury and ultra-luxury residential projects, which accounted for 34% of take-up last year.

“In Metro Manila, previously, it was the mid-income and upscale segment that dominate, from P3.2 million to P8 million per unit but now the norm is the P8 million dominating the demand,” Mr. Bondoc said.

“In less than three months, developments by companies like Rockwell and Arthaland registered almost 30% take-up. So you could just imagine the take-up in the next twelve months. And remember these are projects that breach the P500,000 per square meter mark.”

Mr. Bondoc said the retail and hotel segments are also expected to continue their recovery amid “revenge spending, traveling and dining.”

“We are positive about retail. Vacancies are dropping, mall operators are now reverting to pre-pandemic rates, meaning they are now charging full mall lease rates,” he said.

Hotel occupancy rates are expected to rise as travel restrictions have been further eased.

“Our projection is that it will break 60% occupancy rates in 2023. Previously, we were only seeing 20% in 2020, then in 2022, 51%, but definitely that will breach more than 60% in 2023,” he added. — J.I.D. Tabile