Image from primer.com.ph
Here are David Leechiu's thoughts on what is happening now and post lockdown:
1. BPO will resurge sometime year-end because by then, both Philippines and USA should have adopted to a "new normal". Best example: we received a requirement for 4,000 seats to be concluded before September - and that is anywhere from 20,000 to 30,000 sqm.
2. The global recession will compel the West to offshore more jobs to Bangalore, Manila, Cebu and Clark.
3. As the article says, 95% of office rents were still collected last April. Despite these offices not being used.
4. MOST Office landlords have given rent deferment only, a few have given rent discounts or partial waiver; fewer still have decided to give ZERO concessions (there are big names in this segment).
5. More than half of restaurants will not survive, especially those outside the shopping malls, which will cause a drop in ground floor rents, but it will open up more opportunities and brands to emerge, and new players that could not before COVID, because they could not get space.
6. The lower middle class and below will re-populate the malls; the middle middle and upper middle class will migrate most activities to online transactions.
7. POGOS will make a big come back as soon as travel bans are lifted. The POGOs from India may come and enter the market this year, which will add to the demand, and it will be meaningful but will not be as big as China.
8. Domestic tourism will flourish because we have been locked up for so long. Foreign tourism will take a while. Filipino going abroad will be limited also because of fear.
9. Residential will soften: pre-sales are almost zero, developers will provide deferred payments to buyers currently paying monthly. The big drop is happening in the upper middle market, because they have borrowed heavily, and their incomes are compromised; the middle middle and low end will follow next; the high-end market last.
10. China-based customer service operations owned by Western companies will diversify and open new centers in the Philippines, and this will be a new demand driver and they will import Chinese labor to live and work in the Philippines, similar to what the POGOS have done; but I think this labor segment will be of a much higher profile than what we are seeing from POGO. This is very, very exciting. It will add another layer of demand not just for office but also for residential, retail and tourism.
11. Japan will rediscover the Philippines and this will push them to have Philippines in mind for a longer-term strategy: retirement, customer care operations, health care.
12. WORK FROM HOME (WFH) is not sustainable in the Philippines for many reasons: poor telecom connectivity, too many relatives and therefore distractions (domestic violence being a major factor), it is simply too hot because 70% of households do not have roof insulation nor air-conditioning nor access to clean water, and corporate fraud will accelerate significantly because in WFH, there is very little supervision and therefore there is more risk for fraud and corruption across all levels. The upper management can work from home - except that their spouses won’t be able to tolerate their presence for this long and so their marriage (and therefore assets) will be at risk.
13. For some companies, the social distancing has required MORE office space; so for example : companies with 1,000 people use 6,000 sqm... but with lockdown only 40-50% are on site, another 25% WFH, and the other 25% are just on standby because they cannot do WFH. As such, when the lockdown is lifted, many companies will practice social distancing which will require them to need 9,000 to 12,000 sqm TEMPORARILY, while social distancing is necessary. So, this will create more demand.
14. There is only 34,000 sqm of PEZA space entering the market this year so those of you here with PEZA space it will be a good ride from August onwards.
15. Back to normal and big bounce back once vaccine is off the shelf - if Bill Gates is right, then the vaccine should be here in the Philippines between February and May, 2021 - the need and demand will be so great that global supply chains will be activated to churn the supply and production of these vaccines. There is a strong chance that this vaccine will not come from USA, Germany or Switzerland, where medicine have traditionally come from; in 2002 during the outbreak of SARS, there were very few R&D facilities globally; in contrast to today the R&D laboratories in China, Singapore, Hong Kong, Israel, India, Australia, Taiwan, South Korea and other countries are as effective, if not better. The exchange in ideas and data, technological advances, less war and strife, new and almost infinite capital, the economic consequences - all these are drivers to improve the chances of finding a cure sooner than later.
He adds what if the vaccines will indeed be out by May 2021, then we just have to ride the tide the next 11-12 months. The infinite levels of fiscal stimulus, creation of new BPO and POGO jobs, all these should tide us over.
Rick Manzano is a Licensed Real Estate Broker from RE/MAX Capital Alabang.