IT-BPM office space demand seen slowing down in Q4

MANILA, Philippines — Office space demand from Information Technology-Business Process Management (IT-BPM) sector may slow down this quarter due to a government decision that allows a 100 percent work from home (WFH) or remote work arrangement.

“I think there might be some slowdown in the fourth quarter given there is an FIRB (Fiscal Incentives Review Board) resolution that allows PEZA (Philippine Economic Zone Authority) locators to transfer from the PEZA to the BOI (Board of Investments),” JLL Philippines head of research and strategic consulting  Janlo de los Reyes told reporters in an interview.

“I think new space demand coming from them (IT-BPM) will slow down, but there is definitely some pick-up still,” De los Reyes added.

In September, the FIRB allowed IT-BPM companies in ecozones to adopt a 100 percent WFH arrangement while retaining their tax incentives by transferring their registration from the PEZA to the BOI.

Similarly, Colliers Philippines also agreed that the policy is likely to stifle office demand in the fourth quarter.

“Occupiers are taking a wait-and-see stance as the resolution’s implementing rules and regulations have yet to be finalized,” Colliers said.

While the FIRB resolution was issued in September, the guidelines for its implementation were released only on Oct. 18, through a Department of Trade and Industry (DTI) memorandum circular.

JLL said IT-BPMs, particularly the financial (banking) sector, remained the top office demand driver in the third quarter.

The sector accounted for 85.3 percent of closed transactions during the quarter, while corporate occupiers made up 8.7 percent.

JLL said office pullouts also moderated during the quarter from 135,300 square meters last quarter to 93,400 sqm.

JLL said the sustained recovery of leasing volumes and deceleration of move-outs and lease terminations aided in the decline of vacancy levels at 17.3 percent, down by 45.9 basis points quarter-on-quarter, amid new supply.

“The future of work sways toward continued return to office  as we saw 62 percent of clients operate back to pre-pandemic levels by the end of the third quarter of 2022,” De los Reyes said.

JLL said headline rents remained relatively stable and saw an incremental contraction of 0.1 percent quarter-on-quarter.

“However, the gap between headline and transacted rents further narrowed, closing at 5.9 percent compared to nine percent last quarter and a steep decline from 19.9 percent in the third quarter of last year, as landlords remained optimistic of the improving leasing demand,” JLL said.