The Philippine business process outsourcing (BPO) and industrial/logistics sectors are likely to bounce back within two to three months in a post-coronavirus (COVID-19) pandemic environment, as multinational corporations seek operational efficiency while e-commerce gains more traction.
This is according to property consulting firm KMC Savills, which recently surveyed various industries in relation to potential impact of the pandemic on various sub-segments of the real estate sector.
In a briefing via Zoom on Tuesday, KMC Savills senior manager for research and consultancy Fred Rara said that similar to what was seen during the global financial crisis of 2008-2009, the quest to unlock cost-savings and greater efficiency in global operations of multinational corporations could benefit the BPO industry in a post-COVID-19 environment.
KMC Savills’ survey on business sentiment
At the expense of traditional retailing segment, Rara said industrial/logistics sector— including new hot spots beyond Southern Luzon, particularly in Clark and Tarlac —would likely benefit from further growth in e-commerce as people get used to transacting using online platforms even after the lockdown of key regions.
Industrial rental rates will likely be at least flat, as “hundreds of thousands” of square meters of demand come in vis-a-vis delivery of new supply, said Michael McCullough, KMC Savills managing director.
Of various central business districts in the metropolis, Ortigas Center will be the most challenging in the office property sector, with vacancy rate hitting 25 percent in 2021 to 2022, which will jack up average office vacancy rate in Metro Manila to 10 percent.
In the first quarter, office vacancy rate in Metro Manila was stable at 5.5 percent but will likely rise to high single-digit levels later in the year.
“What to watch is really Ortigas Center. What are they going to do with all that new inventory which is not Peza (Philippine Economic Zone Authority)-accredited and not Pogo (Philippine offshore gaming operator)-friendly?” said McCullough.
He said Makati CBD had always been “more or less a safe bet” alongside BGC, being host to a lot of shared services hubs.
Even within BPOs, McCullough said there might be some players—particularly those serving the tourism and hospitality sectors—that might downsize and offload space, bringing to market some 200,000 square meters of space available for sub-leasing.
KMC Savills also sees increasing adoption of work-from-home weighing down occupancy rates in the next two years, especially as internet connection improves.
On co-working office space, he said those who were catering to enterprise clients and make a big deal about health and wellness safety protocols would likely fare well in a post-COVID 19 lockdown environment.
On the residential segment, KMC Savills said there would likely be fewer residential project launches as developers cut capital spending and adjust cash flow strategies.
KMC Savills sees slower take-up from overseas Filipinos and the lower-income segment due to job losses. Developers catering to middle-income market may still have a steady stream of cash from receivables.
“We expect high-end and luxury buyers to be more opportunistic during this period as they observe any price changes in the secondary market. On the flip side, if owner cash positions are threatened, assets may be liquidated,” Mindoro said.
In terms of land values, McCullough sees debt-strapped landowners offering discounts of as much as 20 percent if they need to liquidate assets fast. INQ