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Townships, Flexible Workspaces Fueling Office Demand in the New Normal

Office demand is expected to recover by the end of the year, with most businesses leaning towards spaces within townships, according to real estate consultancy firm Lobien Realty Group (LRG), reported in Business World. Demand for flexible workspaces likewise picked up, especially among startup companies and freelancers.

In a Facebook post, the group said that moving to a workplace close to residential, entertainment, civic, and recreational spaces is increasingly appealing for most companies. Employees have accommodations options near the office, which is equally a benefit to employers. 

Meanwhile, the draw of flexible workspaces comes from various factors. Most of them are in strategic locations in competitive areas. In terms of leasing, they’re flexible in agreement periods, with some offering a pay-as-you-use scheme. Facilities are equipped with technology, accommodating fast-changing business needs. Lastly, there’s a sense of community in these workplaces, despite members coming from different industries, since operators offer crowd support services.

Road to Recovery

Despite the current crisis putting the brakes on companies’ expansion plans and offshore gaming operators giving “mixed signals” on their operations, LRG is confident that appetite for office space will recover by the end of the year, as long as the coronavirus crisis is managed within the second half.

Comparing the second quarter of 2020 to the same period last year, total office supply slumped to 751,000 square meters (sqm) from 1 million sqm. In terms of available offices, it went from 526,000 sqm to 378,000 sqm. Half of this available supply was leased out in the second quarter of the current year, while the same period last year registered 47 percent.

In terms of vacancies, the current year decreased to five percent from 7.31 percent last year. The average rent price climbed to P1,195 per sqm from P1,110 per sqm.

Demand Drivers

Mentioning the figures from the end of 2019, LRG said that Philippine Offshore Gaming Operators (POGOs) and business process outsourcing (BPO) firms led the demand for office spaces. Covering 36 percent of office spaces in the capital region, POGOs occupied 1.16 million sqm of total office space, representing 10 percent of the total leasable office stock in the country pre-pandemic. 

Meanwhile, the BPO sector took up 30 percent of the total supply of the capital region’s office spaces, as reported in this Facebook post. Citing a report from the Information Technology and Business Process Association of the Philippines (ITBPAP), the country ranked first in voice BPO and second in non-voice in terms of complex services in the world.

In the top 50 Digital Nations, the Tholons Services Globalization Index 2019 puts the Philippines at the fifth spot. In the list of 100 Super Cities, Manila placed second, Cebu City at 12th, and Davao City at 95th. For this reason, LRG pointed out that the outsourcing industry still has the Philippines as a top choice as a provider.

Provinces as Growth Centers

According to LRG’s report, the vacancy in leasable office spaces in business districts in the province stands at 16 percent. Compared to figures in 2019, the office supply in these locations increased to 307,000 sqm from 297,000 sqm. However, in terms of leasing, it declined by six percentage points to 21 percent. The rent went up to P620 per sqm from P551.

With the national government’s push to develop areas outside Metro Manila, LRG is confident that more investments will be pouring in provincial business districts. Earlier, the Department of Information and Communications Technology (DICT) said that it has proposed a P13.49 billion national broadband program for next year, a sharp increase from this year’s P296.46 billion, as reported by Business World. This will primarily fund digital cities and provinces, among many others.

The program consists of six key areas: the national fiber optic cable backbone, cable landing stations, accelerated tower build, accelerated fiber build, satellite overlay, and broadband delivery management service.

According to DICT Secretary Gregorio Honasan, the need for faster and more accessible internet connectivity has become more urgent given the impact of the coronavirus crisis and demands of the new normal.

The DICT earlier identified the next ‘digital cities’ by 2025, as reported by the Philippine News Agency (PNA). Some of the chosen are Balanga in Bataan, Cabanatuan in Nueva Ecija, Malolos in Bulacan, Metro Rizal, Metro Cavite, Tacloban in Leyte, and Zamboanga City. These municipalities will receive support from the national government in improving connectivity infrastructure.

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Article and Photo originally posted by Lamudi last August 17, 2020.