Office space sector hit record sales this year despite less BPO demand

Office space sector hit record sales this year despite less BPO demand

- in Economy, Philippines
A typical BPO company set-up in the Philippines. For the past two years, the industry, which used to make up the majority of the office space sector's demand, has been declining. Image from ABSCBN.

Real estate services firm Leechiu Property Consultants (LPC) said on Monday that the demand for office space reached a record high of 1.5 million square meters this year. According to the firm, the high demand generated by the online gaming industry drove the growth, offsetting even the slowdown from the business process outsourcing (BPO) sector.

Offshore gaming accounted for 433,000 sqm of this year’s demand. Flexible workspaces, multinationals, and local entrepreneurs together accounted for 422,000 sqm of office space demand.

The demand for office space was highest in Metro Manila, whose market accounted for 74 percent or 1.16 million sqm. This figure is a growth of 27 percent from 2017’s demand of 910,000 sqm.

Outside Metro Manila, the highest office demand is in Clark Global City at 156,000 sqm. This is followed by Cebu and Laguna who had a demand of 133,000 sqm and 46,000 sqm, respectively. The fourth highest area of demand is Davao City with 28,000 sqm.

These figures were reported by LPC chief executive David Leechiu in a news press briefing on Monday, December 10. The numbers, according to Leechiu, include pre-commitments made by BPO tenants who are competing for scarce Peza-accredited spaces in Metro Manila which are still to be completed in 2019.

While the BPO industry is still the largest driver of the office space sector, the demand of BPO’s has decreased. Leechiu said that BPO demand in Metro Manila shrunk to 289,819 sqm this year, a decrease of almost 20% from last year when that market needed 355,000 sqm.

“We’re seeing continued growth outside Metro Manila–which is a positive development. At the same time, we are seeing a contraction of BPO demand, which continues to be the largest single industry contributing to demand and a key driver of the economy,” Leechiu said.

The LPC exec said that this is the second straight year where the demand from BPOs has declined. The trend was described by Leechiu as “disturbing”.

Projections peg the demand from BPO’s to begin increasing again by 2019, as rising costs in the United States would drive companies to expand their operations areas. A number of global companies are also expected to complete their diversification programs by next year.

Leechiu expressed optimism for the industry’s prospects, especially by 2021. He predicts that by then land prices will rise in strategic locations outside but adjacent to the Metro like Clark, Cavity, Laguna and Batangas.

“The completion of eight projects totaling 665 km of roadway will make 2021 a milestone year in infrastructure development,” he said. “New transportation arteries will spur growth in rising regional centers in these key areas.”

Concluding his statement, Leechiu urged the government to approve the Philippine Economic Zone Authority IT park applications as a way to sustain the growth seen in the office space sector.

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