The Philippine office market continued registering new demand in the first quarter of 2021 and is growing despite the pandemic as more firms are optimistic on a post-coronavirus economic recovery.

Mikko Barranda, associate director at Leechiu Property Consultants (LPC), said office demand reached 109,000 square meters (sqm) in the January to March period, up by 22.5 percent from 89,000 sqm in the fourth quarter 2020.

“There was a renewed interest in the office market, activity spur(s) up and we are doing deals with tenants today (with) either new leases and renewals for as long as five years. It’s a testament to the commitment of many of these investors in the Philippines and that they believe that the recovery is just around the corner,” he said in a virtual press briefing Monday.

Barranda said the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law and coronavirus disease 2019 (Covid-19) vaccine rollout are expected to improve investor sentiments in the next few months.

He said the information technology and business process management (IT-BPM) remains the single largest driver of office demand in the first quarter as the Philippine offshore gaming operators’ activity (POGOs) flatlined due to the pandemic, China’s clampdown, as well as high taxes being imposed on the industry.

Apart from the IT-BPM sector, Barranda added traditional companies and online retail companies led the growth for the last two to three quarters.

“It shows the confidence that many companies have for the Philippines. Most tenants, 95 percent tenants have continued to pay rents and renewed leases across the board despite what their corporate headquarter says about shedding more (office) spaces and a lot of companies are anticipating growth…,” he said.

In the first quarter of 2021, the IT-BPM industry accounted for the largest single take-up at 33,000 sqm. followed by e-commerce at 19,000 sqm., which more than tripled its take-up from its fourth-quarter level of 6,000 sqm.

“E-commerce is proving to be a sunshine industry,” LPC chief executive officer David Leechiu said.

Meanwhile, LPC reports active office requirements of 266,000 sqm. from firms looking to transact within the year.

Of the total, IT-BPMs account for 33 percent; POGOs 12 percent; and retail firms, 7 percent.

Barranda said POGOs started showing interest once again with a live requirement of 31,000 sqm.

But he said while it is too early to tell if POGOs have decided to remain in the country, a resolution of their concerns would help affirm their commitment to the country.

Barranda added that should these transactions be completed, demand in 2021 could surpass that posted in 2020.

To meet rising demand, Leechiu urged developers to build more office spaces within this year as supply is expected to be low in the next three to four years.

“The best time to start building is more or less sometime this year and that’s the time when interest rates are the lowest ever been; contractors, architects, engineers, project managers have very few jobs; and for all the supply chain of building buildings would be best negotiated during this times when they have less work, they have more time, and they are more flexible with their rates and charges; very small competition for logistics meaning there is less traffic moving goods around, less competition for staging areas, there is a less competition for basic commodities like fuel and cement and steel, and the currency is more or less holding if not appreciating in the next few years,” he added.