Expert Talks: Mikko Barranda on Philippine Office Market Trends Post-COVID19

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The ongoing COVID-19 pandemic has greatly affected the office sector in terms of growth and demand from companies. The health crisis has resulted in the delay of construction for many office developments, the increase of vacancies, and the shutdown of office spaces in key areas in the country. However, COVID-19 also opened up opportunities for the office market to expand, and highlighted new trends for the real estate industry to move towards the new normal. 

In this episode of Lamudi Academy: Expert Talks, Mikko Barranda, Associate Director of Leechiu Property Consultants (LPC), shares his insights on the performance of the Philippine office market in the past years, and forecasts how this performance will go in 2020, especially during the new normal.

Executive Summary

Barranda mentioned that 2019 was a landmark for the Philippine office sector, with over 7 million square meters of demand for office spaces. 2019 has marked the Philippine office market as one of the largest office markets in the world, next to Shanghai, Beijing, and Tokyo.

However, many external and internal risk events that occurred in 1Q2020 has eclipsed the outstanding performance of 2019 in the Philippine real estate market. Such risk events include the Taal eruption, crackdown on the POGO sector, review of government-private sector contracts, tension between the USA and the Philippines in terms of the Visiting Forces Agreement, threats of global recessions, instability in the stock markets, and the ongoing COVID-19 pandemic.

Despite all these risk events, Barranda mentioned that they are still optimistic about riding out the property market and that they believe these risks open up windows of opportunity for the Philippines. In particular:

  • Nine infrastructure projects are on track for completion within the next 18 months. An example would be the bridge that connects Bonifacio Global City to Ortigas Center, cutting down an hour-long commute to 12 minutes
  • Resilient demand from the IT-BPM industry as multinational corporations aggressively cut costs and increase production in a climate of declining revenues
  • Strong comeback of the POGO sectors once travel bans are lifted
  • Legalization of foreign ownership in more industries
  • Multinational corporations to expand out of China
  • “Infinite” levels of global fiscal stimulus packages
  • The Philippine REIT sector is well-positioned for longevity and sustainability

Barranda mentioned that these factors will drive a resurgence of demand for the Philippine office and residential sectors as the COVID-19 crisis relaxes and gradually clears up. 

Office Market Trends


For 1Q2020, LPC has recorded 157,000 square meters of office transactions, which are down by 4% year-on-year due to the coronavirus pandemic. There are also over 636,000 square meters of live requirements being transacted today, indicating a growth in demand by another 25%. 

Barranda said that ironically, social distancing and the inability to work from home has ushered in a demand for the office market. The social distancing aspect has resulted in an increase of density in terms of how many people can be allowed in an office space, what percentage of the workforce will be allowed in the office, and who will be working from home. Likewise, since many employees do not have access to the Internet and many companies are strict on their data privacy protocols, there will be an increased demand for plug-and-play and fitted office spaces to accommodate employees unable to work from home.

For the POGO sector, demand has softened due to the travel ban implemented as a safety measure for the ongoing pandemic. LPC reveals that 28%, or roughly 176,000 square meters, of the total live transactions, are from the POGO sector. They expect the demand to recover by the second half of 2020.

Barranda also said that they are optimistic that the Philippines will have a total demand for office space that will range from 800,000 up to 1 million square meters this year.


Just like the demand, the supply for the office sector has also gone down due to COVID-19. The implementation of the enhanced community quarantine resulted in construction delays for 44% of the country’s 2020 office supply. With this, LPC is forecasting 2020 to have 842,000 square meters, down from 1.498 million square meters. 

Barranda also reiterated that despite the metro being under a general community quarantine, it will take a long time before construction can go back to full blast. This means many of these pipelined constructions will be pushed for completion in 2021 and 2022.

2020 Forecast

According to previous demand versus supply trends, data shows that the IT-BPM office demand has been stable since 2006 and has been growing modestly until 2015. However, it was forecast in 2016 that the IT-BPM sector alone wouldn’t have been able to absorb all office demands, which could have resulted in a total of 1 million+ square meters of vacancies each year.

This is where the POGO sector plays an integral role in office space demand. Since 2016, POGO demand for office spaces has absorbed the supply that IT-BPM couldn’t take. Without the POGO sector entering the Philippines, oversupply would increase to 5.5% in 2016 and skyrocket to 9.7% in 2019.

According to the industrial analyses of 2018 and 2019, the taxes collected from POGOs totaled to Php 8.4 billion in 2018, which skyrocketed to a total of Php 14.3 billion in 2019. This growth brought in by the POGO sector entails benefits such as:

  • An increase in office space by 1.6 million square meters and residential spaces by 1.8 million square meters
  • A decrease in vacancies and oversupply
  • Production of over 120,000 jobs for Filipinos
  • An approximate of Php 340 billion worth of salary spent by employees
  • The largest inbound tourist market worth $1.3k per capita

Barranda also mentioned that despite the oversupply of 2020 in the office market, the COVID-19 pandemic will simply flatten the supply curve resulting in the offsetting of office leasing transactions. The slowdown of such transactions and vacancies are expected to be at manageable levels by the end of 2020. The IT-BPM and POGO industries are key factors in sustaining a balance in supply and demand. 

Developer Market Share

Barranda discussed that for 1Q2020, 45% of the total Philippine office supply (14.2 million square meters) belongs to the top 10 developers that currently occupy 6.4 million square meters of office space, while the remaining 55% belong to top ten families and developers,  accounting for 1.3 million square meters.

In the mall sector, a total of 12 million square meters, or 80%, of the mall stocks are occupied by the top five developers only, namely SM Prime Holdings, Robinsons Land, AyalaLand, Megaworld, and Vista Land. The remaining 20% is absorbed by Filinvest, Double Dragon Properties, Gaisano, the Araneta Group, and Shang Properties.

Most of the office spaces in the PH mall supply are concentrated in the National Capital Region, making up 6.7 million square meters, or 44%, of the total 15.18 million square meters mall stocks.

According to Barranda, the current supply of offices and malls combined totals 29.4 million square meters of income-generating assets that are qualified for REIT. “This really shows us that [the Philippines has a long way to go in terms of] launching REITs, hopefully in the coming months.” Barranda also mentioned that because these spaces are owned by 15 to 20 companies, it lessens the bureaucracy in terms of investing in REIT assets.

Trends in the New Normal

Other than the increase of demand and supply for the office sector, Barranda also highlighted the new trends that the office market will experience in the new normal. One of these trends is the expansion of the BPO sector due to more companies outsourcing more work to the Philippines. The expansion of IT and BPO industries entails more Philippine Economic Zone Authority (PEZA) accredited areas to be built and developed especially in key investment areas.

Part of the expansion of office spaces by the BPO sector is decentralization and diversification. This means that BPO companies focused in Metro Manila should also open offices in provincial hotspots such as Cebu, Davao, and New Clark City in Angeles, Pampanga. Barranda pointed out that decentralizing and diversifying office locations will help avoid disruption of business operations in case a BPO office needs to shut down until further notice during a pandemic or calamity.

Due to the ongoing COVID-19 pandemic, social distancing will create a demand for more flexible work options. Until a vaccine is developed and available for all, companies will continue to rent temporary office spaces to accommodate their employees who can’t come to the office or work from home. 

Just like the BPO sector, the POGO sector is also forecast to expand by 3Q2020 and 4Q2020. Barranda emphasized that if the challenges involving the government and the POGO sector are cleared, POGO industries will bring in more investors and growth even in the provinces.

The new normal seems to be favorable for REIT-able assets, in a sense that the Philippines can offer a REIT-able portfolio of at least 22 million square meters of office and mall spaces. Barranda also said that the next months are suitable for people to invest in REIT assets.

With COVID-19 crippling the operations of the real estate market, there is also an increase in the digitalization of marketing, sales, and transactions. “The Philippine real estate industry is still very archaic and very traditional,” Barranda said, emphasizing that the lockdown has amplified the challenges real estate professionals face in doing business. During the new normal, the real estate market will be maximizing thought leadership, lead generation, and digital walkthroughs with a hybrid of offline and online means of doing business.

Lastly, there will be an increase of sustainable and smart buildings. Incorporating sustainability in office developments reduces energy consumption and the carbon footprints of the companies occupying the building. With social distancing being an important part of the new normal, many buildings utilize face-recognition activated doors, turnstiles, and parking to avoid spreading germs and viruses. Sustainability and contactless technology are important in keeping employees safe and healthy in the new normal.

If a second wave or another set of quarantine policies take place, will real estate be resilient enough?

Barranda believes that the office market will be resilient while other markets will be hit if a second wave arrives or if another set of quarantine policies will take place. “The residential market might be one of those markets [that won’t be resilient] since many banks are still deferring payments to those who have mortgages.”

He said that if a second or third wave arrives, those banks might not be able to extend that much time for these buyers to pay for their mortgages. “We might see some structural changes in pricing in the residential market, but we are still observing how things will play out in GCQ.”

As for the mall sector, Barranda mentioned that while malls are slowly recovering from the pandemic, a second or third wave may amplify the challenges faced by the mall sector and they may take longer to recover from the crisis.

What business policies should we prioritize to make the new normal possible for workers?

Barranda talked about DTI circulars and memorandums regarding incentives for employees. “We need to take time to really understand these memos, seek them out, and see how they’re relevant to us,” he said. These incentives are crucial for employees unable to work in the office or work from home, and for those who don’t have a steady flow of salary.

The DTI has also released health guidelines for the new normal that covers the density of the office and social distancing. “It would be good to have more details and for [the guidelines] to be thorough in terms of how we can implement these [at work].” Barranda hopes that the government will be clear with these guidelines so that employees can work properly in the new normal.

While the COVID-19 pandemic has amplified many of the challenges in the Philippine office market, the pandemic has also brought in windows of opportunity for the office market to thrive, adapt, and keep up with the changes that ensure business continuity and work for employees.

Learn what thought leaders today think about the industry in light of current events. Stay tuned for the next episode of Lamudi Academy: Expert Talks on Lamudi’s official Facebook page.

Ready for your broker business to bounce back from the health crisis? Post 50 RFO and rental listings on Lamudi for FREE until June 30, 2020 only. Simply log in or register to get started. 


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