Real estate services firm KMC Savills Inc. said it expects office space rents to flatten this year as the industry shifts amid the COVID-19 health crisis.
“I guess we kind of see the rate, the rents going sideways. They’ll be flattening out, I think, for the midterm to longer term. It’s finally become a tenants market. For more than 10 years, it’s been a landlords market. There’ll be a lot of supply,” said KMC managing director Michael McCullough.
He said the growth would be more for the subleasing segment as well as for BPO and POGO segments that showed high demand even during the current crisis.
“The administration is pretty pro-POGO, and many other local politicians, as well. For POGOs, it’s a mixed bag for them. Some are doing sports betting, but no sport is being played internationally, so their business is impacted. For other POGOs, it’s so lucrative that they’ll continue to grow and expand, particularly in places where they are protected like the Philippines,” McCullogh said.
He said that for other office segments, the immediate need is “plug-and-play” type of office space.
“These opportunities are going quickly. There are those willing to sign up for five-year term leases. Again, there is also the mid-term timelines which is more of wait and see, until the situation normalizes and the long-term which seems to be bullish, but more of the collaborative spaces,” McCullough said.
The advisory firm said that developers were grappling for consistency as there was a delay in the fulfillment of existing projects because of supply chain bottlenecks.
“It could also be a deliberate effort on the developers side to really extend the construction timeline in order for them to offer a more affordable account. There will be fewer launches this year and probably until next year,” said KMC senior research manager Fred Rara.
Residential market will have a widespread postponement of major purchases this year against the backdrop of economic uncertainty driven by the COVID pandemic, he said.
KMC said while a disproportion among higher segments was anticipated, low income households would feel the brunt of economic disruption that may push them to defer housing purchases.
Acquisition by overseas Filipino workers would also be slower in tune with the slowing economy. KMC firm predicts a slower pick-up from the segment because of a possible 13-percent decline in remittances in 2020.
