What is the future of work?
Around a year ago, a lot of companies were ready to embrace remote work for the long haul. The intermittent increase and decline in the number of COVID-19 cases prompted decision-makers to adopt remote work strategies to minimize disruptions, as the country intensifies its vaccination drive to achieve herd immunity.
However, the perceived erosion of company engagement and corporate culture became a cause of concern.
Corporate culture is crucial to a company’s success and excessive remote work can negatively impact culture. The “future of work” points to a real estate strategy driven by more solutions that create positive employee experiences, such as learning and development opportunities and flexible location strategies.
There are functions, however, that can work well in a remote setup. Some positions can be performed anywhere and companies can use this as leverage to attract top talents from broader geography.
Additional supply in the market
There are over 800,000 sqm of new supply expected to be completed within the year, yielding 10 million sqm of available prime and Grade A office space in Metro Manila by end 2022. Average vacancy rates have increased to around 15.8 percent in the first quarter due to some notable exits of Philippine offshore gaming operations (POGO) companies.
While leasing activity is still below pre-pandemic performance, tenants are gradually committing to long-term renewals, thus, pulling up average rents. As the divide between in-office and remote work become clearer, corporate occupiers are now firming up their strategies and scenario planning, while still maintaining flexibility in their real estate requirements.
Tightening window of occupiers’ market
Maximizing portfolio flexibility is a growing hallmark of postpandemic commercial real estate decision. As corporates develop an effective ecosystem of workplace, taking into consideration the choice of employees for flexibility, organizations are aligning themselves into a more dynamic use of space and new benchmarks in office density.
The task of finding the right amount and balance of office space is being challenged further by the varying degrees of economic and border openings, which are putting a lot of strain in the already disrupted supply chain network.
In the local real estate industry, the delays caused by supply chain issues are causing unnecessary delays in the shipment of building materials, further pushing back completion dates of developments in the pipeline.
These delays and the expected growth of office space demand will soon help turn the tide in favor of the landlords. In the near- to medium-term, barring the spread of more transmissible variant of the COVID-19 virus and as immunization are further bolstered by more aggressive vaccination drive in the peripheral areas, we can expect a reversal of the leveraging power in space negotiations back to the landlords and developers, as office fundamentals fully recover.
Claro dG. Cordero Jr is director of Research, Consulting & Advisory Services at Cushman & Wakefield. For more updates, on the Philippine property market, follow the Cushman & Wakefield in all major social media platforms