Colliers sees continued rise in office sector transactions in 2024

Transaction activity in the local office sector is expected to continue improving next year, driven by potentially sustained demand, real estate consulting firm Colliers said.

“Transactions have been increasing by about 10-15% quarter on quarter. We think this will continue until next year,” Colliers Associate Director for Office Services Kevin Jara said.

“We don’t see any regulatory headwinds, political headwinds,” he added.

Mr. Jara said, however, that there might be a slight slowdown in demand during the US elections towards the end of next year, attributed to the significant demand for outsourcing.

“During those months, there’s a slight slowdown but usually recovers after the season,” he noted.

Office space transactions for the third quarter stood at 197,000 square meters (sq.m.), which is 17% higher than the 169,000 sq.m. in the same period last year, data from Colliers showed.

About 167,000 sq.m. of vacant spaces were recorded during the period, higher than the 137,000 sq.m. seen in the previous year, mainly driven by the completion of new office buildings. Occupied office spaces, on the other hand, reached approximately 11.3 million sq.m.

Mr. Jara said that office demand next year is likely to be driven by the business process outsourcing (BPO) sector, especially as companies seek to grow their headcount.

“The BPO industry has a roadmap to double their headcount until 2028. So, it’s just a matter of if those additional head count will translate into office space,” he said. “But regardless, it’s still going up.”

In the third quarter, traditional offices comprised the majority of office space deals at 98,000 sq.m., including government agencies, telcos, insurance firms, and flexible workspace operators, the property consultancy firm said. The figure has risen from 69,000 sq.m. previously.

The information technology and business process management sector recorded 70,000 sq.m. of transacted spaces, lower than the 93,000 sq.m. a year earlier.

Philippine offshore gaming operators reportedly transacted about 29,000 sq.m., an increase from the 7,000 sq.m. last year, but still lower than the 55,000 sq.m. transacted in the second quarter.

During the third quarter, the demand rose by 10.78% to 185,000 sq.m. of office spaces from 167,000 sq.m. in the third quarter last year and 170,000 sq.m. in the second quarter of 2023.

“We’re also expecting more and more companies, not just BPOs, to do a flight-to-quality relocation. Take advantage of the market because you have potentially cost-effective rental costs in a new building versus your current lease which may have pre-pandemic rents pa which are higher,” Mr. Jara said.

In the first nine months, Colliers reported that about 155,000 sq.m. of office space relocations were recorded, of which 69% were flights to quality, while 31% were flights to cost.

Flight-to-quality relocations refer to moves to newer, higher-grade buildings, which are mostly in primary submarkets, while flight-to-cost relocations involve moves to older, lower-grade buildings with lower rents, typically in secondary submarkets.

Source: Business World

Gen Z employees in the modern workplace

The emergence of Gen Z in the workforce is shaping the modern workplace in many ways, and it presents a unique challenge for managers who want to effectively lead and motivate this new generation of workers. Understanding the leadership and motivational preferences of Gen Z employees is crucial for improving job satisfaction, productivity and retention. In a recent study by the Ateneo Center for Organization Research & Development, researchers Arnold Policarpio and Mikee Talamayan shed light on the key leadership themes and motivational factors that are important to Gen Z employees in the Philippines. In this article, we will share the seven leadership themes that are most valued by Gen Z employees, explore their motivational factors, and provide practical strategies for attracting and retaining this cohort in your organization.

A new generation with unique values and preferences

Gen Z is the newest generation to enter the workforce, and they have a significant impact on the modern workplace. Unlike previous generations, Gen Z grew up with technology and is highly adaptable to its constant evolution. They are also more diverse, socially and politically engaged, and value-driven, with a desire for social justice and environmental sustainability. In the workplace, Gen Z employees prioritize purposeful work, work-life balance, and personal growth opportunities, and they place a high value on flexible work arrangements, such as remote work. Gen Z is also driving a shift toward a more inclusive and collaborative workplace culture, with a focus on transparency, open communication, and a sense of community. As more Gen Z employees join the workforce, companies will need to adapt their strategies to attract, retain and engage this new generation of workers.

The seven leadership themes valued by Gen Z employees

According to a study by Policarpio, Gen Z employees in the Philippines value approachability, respect, mentorship, competence, fair decision-making, autonomy and support for career and personal growth in their leaders. This perception of ideal leadership may have been influenced by the Filipino relational nature that values relationships over tasks. Leaders who embody these qualities can improve the job satisfaction, productivity and retention of Gen Z employees. Policarpio's study highlights the importance of cultivating positive relationships and offering mentorship to match Gen Z's desired leadership styles. Older generations have an opportunity to guide and share institutional knowledge to help shape Gen Z's chosen career paths.

Motivational factors driving Gen Z employees

According to Talamayan's study, personal achievement, passion, learning, growth and career development are essential factors that motivate Gen Z employees. However, what sets them apart from other generations is their emphasis on family, considering it a significant responsibility to support their loved ones. Unlike their millennial counterparts, Gen Z prioritizes financial security over an interesting work environment and sees their job as a means to save for the future. They also prioritize work-life balance and seek organizations that support this, with a desire for purposeful work and community involvement.

Practical strategies for attracting and retaining Gen Z employees

To attract and retain Gen Z employees, companies need to adapt their strategies to align with their unique values and preferences. For example, offering opportunities for learning and career development is essential to keep Gen Z employees engaged and motivated. Some firms have even implemented programs that allow their workers to learn new skills and attend conferences related to their interests. Additionally, companies need to be flexible and offer work arrangements that support work-life balance, such as remote work options and flexible hours. They can also implement wellness programs, offering gym memberships and mental health support to help employees maintain a healthy work-life balance. Gen Z's value for making a difference in the world is reflected in the rise of social enterprises and purpose-driven companies, where employees can contribute to causes that align with their values.

Source: Manila Times

How to Play the US Property Meltdown

Savvy buyers made a fortune after the 2008 crash. To spot bargains in the latest slump, watch these trends.

Is the pain over yet for U.S. commercial real estate? The answer might be yes for stocks but no for the assets they own. A record $205.5 billion of cash is earmarked for investment in U.S. commercial real estate, according to dry-powder data from Preqin. But good deals may not be available for six to 12 months. Here are some trends investors can watch for signs of the right time to buy.

How much are values down already?

U.S. commercial-property prices fell 16% on average since their peaks in March 2022, according to real-estate research firm Green Street. Unlike the 2008 crisis, when a lack of credit hurt the value of all real estate, today’s downturn hit some properties harder than others. Offices are the worst performers, having lost 31% of their value since the Federal Reserve first began raising interest rates. But troubled buildings need heavy investment to bring them up to a standard that will attract tenants, or to be redeveloped for new uses. Meanwhile, prospects for snapping up e-commerce warehouses at knockdown prices look slim. Warehouse values are down 8% from peaks to reflect higher financing costs, and top industrial stocks like Prologis don’t look cheap either, trading close to net asset value. Apartments might be a better bet. Prices for multifamily buildings fell by a fifth since March 2022. Some owners who paid top dollar for properties during the pandemic using short-term, floating-rate debt may be forced to sell if mortgage repayments become unmanageable when their rate hedges expire.

Property sellers are demanding yesterday’s prices.

Sellers are holding out for prices that are no longer realistic. MSCI’s bid-ask spread reflects the difference between what U.S. property owners are asking for and what buyers are willing to pay. As of July, the gap for multifamily apartments was 11%, the widest it has been since early 2012. The gap for office and retail is a bit narrower at around 8%. Price expectations are closest for industrial warehouses, where sellers want 2% more than buyers are willing to pay. The market will be sluggish until one side caves. In the second quarter of 2023, investment in U.S. commercial real estate was down 64% compared with a year earlier, according to data from CBRE. As the bid-ask gap narrows, it will signal that valuations are approaching more sustainable levels. But this will take some time. It was five years after the 2008 crash before buyers and sellers saw eye to eye on prices on hard-hit assets like apartments—although the adjustment should be faster this time.

What could force sellers to slash prices?

The number of properties that slip into distress will be key. So far, there haven’t been many forced sales. Only 2.8% of all office deals in the U.S. in the second quarter were distressed, according to MSCI. This may be because loans haven’t matured yet. Even if forced sales are rare, the value of U.S. property in distress—in default or special servicing—is rising. In the second quarter, an additional $8 billion of assets got into distress, bringing the total to $71.8 billion, according to MSCI. Including properties that look at risk, the pool of potentially troubled assets is more than double this amount.

Investment-grade corporate bond yields suggest that property prices have further to fall.

Owning commercial property is a bit like owning a corporate bond, only slightly riskier: You bet on the solvency of a tenant, with more uncertainty about the value of the capital you’ll get back. For at least the past 20 years, investors in U.S. real estate required a —Carol Ryan return premium of 1.9 percentage points over the yield on investment- grade corporate debt, according to Green Street’s director of research, Cedrik Lachance. Right now, real estate offers a 1.3 percentage point premium. For the relationship to return to normal and make property attractive again, U.S. real-estate prices need to fall a further 10% to 15%.

The share prices of property companies point to further falls.

Publicly traded real-estate stocks provide a live read of sentiment toward property markets. In the U.S., listed property companies currently trade at a 10% discount to gross asset values, based on Green Street data. This is a good proxy for the size of the price falls that investors expect in private real-estate values. Investors can keep an eye on property stocks for signs of improvement. “Listed real estate is a leading indicator for private in downturns and also recoveries,” says Rich Hill, head of real estate strategy and research at Cohen & Steers, who points out that there are green shoots. At the end of June, REITs rose in value for three consecutive quarters and were 13% above their lowest point in the third quarter of last year. Based on how long it usually takes for a recovery to feed through to the private market, property values could hit the bottom within six to 12 months. All this suggests the best strategy is to buy property stocks but to wait to purchase physical real estate. “If you want to bottom fish in real estate now, do it in the public markets,” says Green Street’s Lachance.

Source: Wall Street Journal