Rental Demand Ramps Up as Employees Return to Office

Return to Office affects rental prices

The daily number of infections continues to lower as the nation brings a huge effort on its vaccine rollout to the masses. Statistically, more than half or 64.1% of the Filipinos are fully vaccinated against the corona virus.  A huge vaccination rate entails an opportunity for the country’s economy to rise again. In fact, Philippines eased its pandemic protocols for businesses to open again and for its people to gradually shift back to the “old” normal along with the increasing immunity rate of the nation’s people. As restrictions are gradually lifted, companies are on a dilemma whether to mandate the return of its employees on-site. Nevertheless, businesses are starting to rent office spaces again to prepare for the return of its people. Thus, the working population had mixed reactions on such company policy. Despite the varying reactions of the workers, it may possibly a start for rental businesses because of the possibility that return to office policies ramp up rental demand.

The New Working Environment of Employees and Its Aftermath

            A huge number of business sectors shifted from physical working environment to a work from home (WFH) setup to cope with the unpreventable restrictions brought by the virus. Many were confused with the sudden big adjustments to make because life continues even the pandemic continues. The only way for people to continue is to adapt and maximize its resources especially for businesses to thrive and lessen the financial impact of the corona virus to is operations.

            The popularity of WFH setup garnered varying opinions. Some say that employers are abusing the setup decreasing the boundary between home and work life. For others, this setup became an avenue to spend more time with their families, rediscovering their lost hobbies or discovering new interests. Also, others became connected again and some had a good time for introspection which is very helpful in maintaining your mental health.

            Though one thing is for sure, a vast amount of the working population went back to their hometowns with the decision of companies to shift on WFH setup. The busy business districts seemed like a ghost town for several months or even years as employees had a new working setup. Rental businesses are operating at a loss. Worse, it lost its tenants as the working population chose to return to their hometowns and businesses had a cutdown on its expenses to survive the ongoing pandemic.

            The financial distress brought by the pandemic to rental businesses and lessors severely impacted its operations and rental rates. In fact, Colliers Philippines, a real estate expert, revealed that office rental rate declined by 3.1% during the first quarter of 2022. But good news for lessors, companies are slowly releasing return to office policies which may be an opportunity to ramp up rental demand.

Why Would Return to Office Policies Ramp Up the Rental Demand?

            The daily COVID cases continue to decrease over time. As a result, companies gradually return to its old ways of operations and starts to establish its workspaces in preparation for the return of its employees. Businesses, whether big or small, scouts for office spaces which are ideal for their operations. This is good start for every sector of business as a lot of rental spaces are currently emptied due to WFH and cost-cutting of different enterprises. However, as return to office becomes possible, business organizations start to find a location for their new start. In fact, Collier Philippines stated that the office space market had experienced a positive net take-up after its consecutive losses for the past seven quarters. In addition, the real estate expert revealed that business process outsourcing (BPO) and traditional companies dominate the rental demand to take advantage of the rental correction and availability of new spaces from different districts.

 Office space market is not the only segment expected to soar in rental demand. Leasing of residential units might slowly see its growth again brought by the return to office orders of companies. Since businesses are only centered on few districts, the working population is left without a choice, especially those living in far provinces, but to rent spaces near their workplaces to save time on commuting daily. The public transportation problem and too much centralization of businesses on few locations made mixed-use developments a worthy and practical investment for the working professionals especially the millennials and Gen Zs. Living in this type of real estate does not only give comfort through amenities but it gives the ease of access to public transportation or if luckier, the dream of walking to work becomes a reality. Aside from the issues of the current public transportation, fuel prices are soaring high. In effect, drivers demand fare increase to compensate with the uncontrolled fuel price inflation. Who wants to spend a lot on commuting daily if you have a choice of renting a residential space nearby your workplace? The working population might think twice on what alternative gives them the best benefit in all aspects.

Reminder for Investors: Take Advantage of Low Rates and Numerous Rental Locations

            It is true that return to office policies ramps up rental demand. It plays a vital role on the growth of leasing businesses on central business districts (CBDs). However, for investors, whether a businessman or employee looking for a residence, it is better to find places which will not only give benefits through rental savings but also the location of the property gives you an advantage in various aspects.  For starters, the location gives you a long-term benefit when it comes to value. Having different amenities such as malls, schools, public transportation, groceries, and even employment opportunities add on the monetary value of the property especially if the location is a busy area or projected to have a huge human traffic.

            Recently, Lamudi, a real estate selling platform, revealed that an increasing number of investors are searching for properties nearby the transportation networks of the country particularly the on-going Metro Manila Subway project of the government. Living nearby train stations gives you efficiency in travel times and more energy to pursue your personal endeavors instead of allotting your time and effort in commuting daily. With a lot of areas emptied by the pandemic and beginning to be populated again, it is a good time for investors to strategically plan their next rental and give them a huge savings through maximizing the plummets of rent.

The Return of the Old Normal

             The long wait is coming to a conclusion. When vaccines were rolled out and proven to be effective to the people, the daily activities of the public are gradually starting to shift back to its old ways even with masks wear on. Schools are returning to a face-to-face setup. Companies are requiring their employees to return to their offices. This entails that people should adjust again. All, or maybe majority, must gradually adjust and leave the temporary lives we had in the past one or two years. The new normal which popularized the new working attire consisting of a suit on top and boxer shorts at the bottom will be reverted to its formal look. Companies are mandating its employees to abandon the WFH setup and return to their workplaces hoping to see the usual day of workers wearing a smile or frustration depending on the situation.

            In the Philippines, the pandemic may have impacted the nation differently. For some, there is convenience while others experience a downfall. But as we slowly return to the old normal, businesses are rising again. For those who experienced a downfall, this is an opportunity to bounce back. Start up a new business, re-open your previous business, or do a rebranding. Most likely, majority of enterprises are on a fresh start especially in terms of establishing their physical location. So why not join the ramp up of rental demand by the return to office policies of companies? Surely, it is a good way to start a physical store for your previous online food business. For rental businesses, it is a good way to give pleasing rental rates and a makeover of your property to attract businesses and employees who look forward in the nation’s return to the old normal.

            In numbers, it is projected that 821,900 square meters will be completed and available as office spaces by the end of 2022. Additionally, about 60 percent of this projected number of new spaces will be located in Ortigas, Makati, and Bay Area. So, if you have the money, why not seize this opportunity to gain an advantage on your next rental or real estate purchase? You might try Bria Homes for your next investment. A lot of transportation networks are being constructed on its property locations for its easy access to the business district of Metro Manila. In fact, a new LRT station is set to be built in Cavite. Muntinlupa-Cavite Expressway gives comfort in reaching the companies in CBDs. Nevertheless, the low rental rates and huge availability of locations are great opportunities considering the return to office policies of the companies. Remember, that the return to office policies is starting to ramp up the rental demand. Why postpone your next real estate purchase if you can seize this opportunity through a bank or Pag-IBIG loan? For starter investors, it should always be remembered that real estate is one of the best investments to have because its value appreciation. Bigger investment means greater profit. You may not enjoy it on the starting years but in the future, chances are high that its value is soaring high.

Written by Steven Hernandez