IT-BPM spearheads property recovery, no POGOs

Published March 12, 2021, 1:18 PM

by Bernie Cahiles-Magkilat

With the rolling out of COVID-19 vaccines, IT-business process management (IT-BPM) firms are now laying out plans for expansion in Metro Manila and the provinces, but online gaming firms continue to register no new transactions since last year, a property management and consultancy firm said.

Mikko Barranda, associate director of Leechiu Property Consultants (LPC), observed that the more inquiries, requests for meetings and site inspections from IT-BPM locators since the last quarter of 2020 up to today indicate the continued expansion of the office sector in the Philippines and its possible recovery in the coming months.

(Mark Balmores, MB FILE)

“The announcement of forthcoming vaccines has given everyone a fresh boost of hope. We’re seeing faster decision making among IT-BPM firms as they lay out plans for expansion not only in Metro Manila but also in the provinces. It’s an exciting time and we project that many of these negotiations are being finalized now or will be closed in the coming months,” said Barranda in a statement.

For instance, he said, current negotiations for space now also cover Iloilo, and because supply there is running out fast, locators have also shown renewed interest in Cebu and Pampanga –in addition to Metro Manila.

However, Barranda said that the Philippine Online Gaming Operators or POGOs, which overtook BPOs in 2019 as the largest driver of demand for Philippine office space, posted no new transactions beginning second quarter 2020 when new taxation regulations were imposed on them.

A travel ban in the Philippines also curtailed whatever expansion plans they may have had.

But Barranda qualified that the Temporary Restraining Order from the Supreme Court issued in January 2020 on those tax guidelines for POGOs “has stopped the bleeding” or the contraction of space occupied by these firms.

Despite many lease terminations in 2020, the industry still maintains an existing footprint of 1.37 million sqm. of office space, making them the second largest occupier next to BPOs that account for 7.2 million sqm. as of 2019.

“POGOs still maintain a significant presence in the Philippines. Perhaps by next quarter, we will know if they will start expanding again and contributing to the recovery of the property market in 2021,” he observed.

They vacated 330,000 sqm. of space from 2Q 2020 up to January 2021, according to LPC studies. Of that total, 49 percent were Philippine Economic Zone Authority (PEZA)-registered spaces keenly desired by IT-BPMs, observed Barranda. PEZA spaces, particularly in Metro Manila, have been scarce. “And we foresee that those PEZA spaces will be back-filled by BPOs,” he said. In 2020, IT-BPM take-up in the provinces also accounted for a record 43 percent of all their transactions in the country. With the opening of new international airports and the upgrading of the older facilities outside Metro Manila, these firms are likely to continue their provincial expansion and to explore other locations, said Barranda

LPC, which deals with eight of the 10 biggest IT BPM players in the country, said this sector has been driving the growth of the Philippine office market for over a decade now.