Turning the property corner through REITs
Colliers Philippines is already seeing green shoots of recovery.
The vaccination figures are encouraging and the Philippine economy is likely to expand at a faster pace this year. Local businesses are starting to reopen and this is a major reason why we slowly see an improvement in the country’s employment statistics. Key businesses are projecting a faster rebound and we see this as a positive for the outsourcing segment.
Colliers sees Metro Manila reaping the benefits as it is among the most competitive sites for outsourcing. The office sector is up for a rebound and real estate investment trust (REIT) players are banking on the sector’s viability.
Attractive site for outsourcing
Based on a report released by Colliers Asia Pacific, Metro Manila remains one of the most attractive sites for outsourcing companies in the region. Among the factors identified in the report are competitive rents, improving infrastructure and the availability of Philippine Economic Zone Authority (Peza)-proclaimed office spaces.
Despite the pandemic, outsourcing firms continue to occupy space across Metro Manila. In our view, occupying traditional office space will remain an integral part of outsourcing companies’ real estate strategies postpandemic. This should ensure a recovery in occupancy and lease rates beyond 2021.
Colliers Philippines believes that amid the still raging pandemic, office leasing continues to experience challenges. There are, however, bright spots that landlords and tenants should maximize during and post-COVID-19.
Colliers Philippines conducted a poll during our Feb. 9 Property Market webinar and the results were pretty interesting. We had more than 300 respondents from various developers, equity firms and other stakeholders. The results showed optimism for the office market in a postpandemic era.
Despite the popularity of work-from-home arrangements, majority of respondents (63 percent) still believe they are more productive in a traditional office setup. This should buoy landlords’ optimism and further improve the attractiveness of offices as a REIT asset.
Tap essential segments’ office requirements
In 2020, Colliers recorded 27,000 sqm of office space deals from traditional occupiers providing essential services such as healthcare, e-commerce, financial technology (fintech), telecommunications, and logistics and warehousing. We project demand from these sub-segments to be sustained over the next 12 to 24 months as these are likely to be driven by a lockdown and a household consumption-led economy. Hence, developers should proactively target these companies’ office space requirements moving forward.
Optimal level of split operations, safe working environment
Colliers believes that companies planning to return to the office postpandemic should consider reconfiguring their spaces to comply with the government-mandated health and safety protocols. These include adjusting density by implementing hybrid working models (e.g. flexible workspaces, mix of work-from-home and on-site). Having spaces for focused work and breakout collaborative zones should result in improved wellness, staff morale and productivity. We recommend that tenants incorporate these options into their post-COVID-19 office leasing strategies.
Perks to support occupants’ expansion
The implementation of Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law should clearly outline the taxes that outsourcing firms should pay as well as the fiscal and non-fiscal incentives that they should enjoy. CREATE Law’s implementing rules and regulations (IRR) should provide clearer guidelines for firms planning to invest in the Philippines. In our view, the reduced corporate tax rates should give traditional firms a greater elbow room for expansion. This should result in an improved office space absorption.
Overall, we see office as a property segment of relative stability. Various recovery enablers should further buoy the sector’s attractiveness as a REIT asset.
Exciting times ahead for Philippine property and REIT.
