06/05/2020
Business forecast from David Leechiu :
Here are my thoughts on whats happening now and post lockdown -
1. Bpo will resurge sometime year end because by then both phils and usa should have adopted to a new normal. Best example : one of our biggest brands clients just gave us a requirement for 4,000 seats to be concluded before september - thats anywhere from 20,000 to 30,000 sqm.
2. The global recession will compel the west to offshore more jobs to bangalore manila cebu clark.
3. As the article says, 95% of office rents were still collected last april. Despite the 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 wont survive, especially those outside the 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 couldnt before covid because they couldnt get space.
6. The lower middle class and below will repopulate the malls; the middle middle and up 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 not as big as china.
8. Domestic tourism will flourish because we have been locked up for so long. Foreign tourism will take a while. Pinoys going abroad will be limited also because of fear.
9. Residential will soften : presales are almost zero, developers will provide deferred payments to buyers currently paying monthly. The big drop will 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 phils, similar to what the pogos have done; but i think this labor segment will be if 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 residential retail and tourism.
11. Japan will rediscover the philippines and this will push them to have philippines in a longer term strategy: retirement, customer care operations, health care.
12. WORK FROM HOME (WFH) is not sustainable in the phils for many reasons: poor telecom connectivity, too many relatives and therefore distractions (domestic violence being a major factor), its simply too hot because 70% of households dont have roof insulation nor airconditioning nor access to clean water, and corporate fraud will accelerate significantly because in work from home there is very little supervision and therefore more risk for fraud and corruption across all levels. The upper management can work from home - except that their spouses wont 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. So when lockdown is lifted many companies will practice social distancing so they will need 9,000 to 12,000 sqm TEMPORARILY, while social distancing is necessary. So this will create more demand.
14. Theres 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 vaccine should be here between feb to 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. Theres a strong chance that this vaccine will not come from usa or germany or switzerland, where medicine have traditionally come from... in 2002 during sars, there were very few r&d facilities globally : today the r&d labs in china sg hk israel, india, australia, taiwan, south korea, etc 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.
Anyway... this is plenty. If the vaccines will indeed be out by may 2021, then we just have to 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.
Hope this helps. Would be happy to answer questions and we would welcome your feedback.
Be well and stay safe!
- David Leechiu
