The Market Monitor Minding the Nation's Business
By Rose de la Cruz
Local property brokers, Leechiu Property Consultants (LPC) traced the 24 percent growth in the Philippine office market to the expansion of government and BPO (business process outsourcing) demand.
A report in business blog site, Bilyonaryo said government demand spurred a 24 percent increase in the office property market to 685,000 square meters in the first six months of 2024 surpassing the growth from BPO firms, Philippine Offshore Gaming Operators (POGOs), and traditional companies.
LPC is a privately held professional real estate brokerage services company operating in the Philippines. The team behind LPC leverages on their combined experience to negotiate even the most complex property transactions for both local proponents and the world’s biggest conglomerates. They redefine real estate services from ‘transactional’ to ‘nurturing’ relationships through informed choices and long term support. Anyone can facilitate a transaction, but only a certain few can provide a mutually beneficial relationship.
“There’s a lot of positive news happening on the demand side,” LPC director Mikko Barranda told Bilyonaryo.
“Many have said that BPO companies are no longer expanding, but you know, we’ve been seeing a lot of transactions continue in that regard. Second is that we’ve seen a lot of government offices actually take space in the last six months.”
LPC said government offices currently in the market are moving from older buildings to newer ones, primarily located in Metro Manila. Government transactions require time to finalize, but most agreements span at least five years.
“We’ve actually been seeing government and their space requirements for a while,” Barranda said. “We anticipated that there would be an uptake by the government if they decided, and it appears that a few of them have completed transactions. We have a few more in the pipeline, but whether it’s a trend or not is hard to determine.”
LPC places the Philippine office space market at around 80 million sqm. In the first half of the year, business process outsourcing companies leased 252,000 sqm, with 68 percent dedicated to expansion.
Government entities occupied 110,000 square meters, marking a substantial rise from last year’s 14,000 square meters.
Traditional companies secured 104,000 sqm, while POGOs, once pivotal in both the office and condominium markets, occupied 74,000 sqm of office space.
Barranda noted a decline in terminations.
In the second quarter, terminations fell by 42 percent compared to the previous quarter, totaling only 84,000 sq.m. POGOs no longer vacate spaces, while traditional companies have reevaluated and are now adjusting their office space requirements accordingly.
He also mentioned that some POGOs, which have remained and are performing well, are expanding into buildings
“We wanted to start this discussion by first reminding ourselves of how blessed and grateful we are in the Philippine office sector. We’ve been monitoring developments in the US, where rising interest rates and reluctance among people to return to offices have significantly impacted the office sector, to put it bluntly,” Barranda said.
The peak of the Philippine office market was during the heyday of the POGOs, but it seems to have recovered, with deals in 2023 totaling a million sqm, potentially marking it as a record year post-COVID.
Already reaching 65-70 percent of last year’s figures in the first half, Barranda remains optimistic about the sector’s promising trajectory.