Philippine office buildings feeling the pinch from POGO firms’ exodus

*_{THE central business district in Makati City is seen on March 11, 2016. — REUTERS/ROMEO RANOCO}*

GROWING DEMAND for office spaces from outsourcing companies is unlikely to offset losses from the exodus of Philippine Offshore Gaming Operators (POGOs), potentially up to 2022, analysts said.

Business process outsourcing (BPO) firms have an opportunity to take up economic zone spaces vacated by POGOs to avail of government incentives, Colliers Philippines Senior Research Manager Joey Roi H. Bondoc said in a phone interview.

But BPO firms are reducing office space requirements, he said, as they await coronavirus disease 2019 (COVID-19) vaccines and set up “hybrid” operations.

“Part of the operations will still be work from home, part of the operations will be on site,” he said.

Businesses have been limiting on site operations to comply with government health protocols and protect their workforce amid the pandemic.

Morgan McGilvray, senior director of occupier services at Santos Knight Frank, said that growing demand in outsourcing is focused on remote work, with companies hesitating to lease additional office spaces until they are able to bring 100% of their workers back on site.

Office demand should surge when 100% occupancy is allowed, Mr. McGilvray added, projecting a fourth quarter or early 2022 recovery.

“Growth in BPO demand will help offset some of the POGO losses, but POGO losses will likely exceed the BPO growth expected in 2021 and possibly 2022,” he said in an e-mail.

Santos Knight Frank projects outsourcing demand for the first half of 2021 to be low at 50,000 square meters (sq.m.) of new lease-up, which could go up to 150,000 sq.m. in the second half.

Lobien Realty Group, in turn, said that POGO office space in 2019 took up 1.2 million sq.m., which has since been cut by 70%. The company noted a 3-4% growth forecast from the outsourcing industry if the vaccine is rolled out and the global market sustains demand.

“That 3% or 4% growth if ever it happens would amount to 250,000 square meters to about 350,000 square meters at most. Therefore, not enough to absorb the current office supply in 2021 which is at 765,000 square meters,” LRG Chief Executive Officer Sheila Lobien said in an e-mail.

“On top of all these, there are many vacant spaces left by POGOs and up to today those spaces are still not tenanted.”

Office market demand remains low due to a slow vaccine roll out, Ms. Lobien added.

Despite this, Mr. Bondoc said the back-office operations of a number of multinationals, e-commerce firms, and telecommunications companies have been taking up office space across Metro Manila, which could become more aggressive with a successful vaccine roll out.

This poses some recovery after vacated office spaces outpaced occupied office spaces last year.

“(This year,) so far the figures are encouraging because we’re seeing net take up so far,” he said.

Article and Photo originally posted by Business World last April 13, 2021 12:06am and written by Jenina P. Ibañez.