(First of two parts)
AFTER seven consecutive quarters of negative net take-up, the Metro Manila Office Market has finally turned a corner as Colliers recorded a positive net take-up for the first quarter of 2022.
Net take-up, which is the change in occupied space between two periods, was recorded at 26,000 square meters (sq.m.) for the first quarter of 2022 and is forecasted to reach 350,000 sq.m. by the end of the year, a significant improvement from the annual net take-up of -274,000 sq.m. recorded in 2021.
This means that the occupancy level has stabilized overall as some companies continue to surrender spaces, right size and downsize while the vacancy is expected to rise due to the supply overhang.
At the onset of the COVID-19 pandemic when nobody knew yet the gravity of the problem, Colliers’ Office Services — Tenant Representation initiated The New Normal Paper Series hoping to guide the office market stakeholders how to survive the challenges of the pandemic.
CHANGING THE WAY WE WORK
This was the first paper that our team wrote and shared, which was based on a Harvard Business Review article, “Is It Time to Let Employees Work from Anywhere?”
Here we discussed the benefits of having a remote workforce such as cost reduction, opportunities to expand the talent reach and scaling productivity. Without any other options since the government imposed very strict quarantine measures, the only way to carry out operations was to work from home (WFH).
Companies had to quickly adjust and adopt new measures to make WFH successful. We noted that the coronavirus disease 2019 (COVID-19) pandemic could become the catalyst for change and businesses must figure out ways how to continuously deliver their products and services efficiently and effectively without compromising the health and safety of their employees, clients, and communities.
SURVIVAL: A SHARED CAUSE
The second paper touched on how the various shareholders can soften the blow of the COVID-19 pandemic. Here we were fully aware that both the landlords and tenants were equally affected but nonetheless called for the application of the bayanihan spirit so that the office market will not hit rock bottom.
We projected then that the smaller businesses which were occupying the small spaces in office buildings were the most vulnerable. Looking at our database, we found that they occupied around 14.7% of the office market, which was potentially how the vacancy could increase in a prolonged pandemic situation.
This was on top of the expected demand slowdown in various sectors like the Philippine Offshore Gaming Operators (POGOs) which occupied 10% of the office stock pre-pandemic.
We advised the landlords to listen to their tenants and try their best to keep them from leaving since occupancy was more important than revenue during this time. Low occupancy of office buildings meant subsidizing the daily operations.
On the other hand, we advised tenants to be transparent and sincere in working out a win-win situation with their landlords, not to gain, but simply to survive together until the market rebounds since survival should be a shared cause.
DECISION-MAKING IN A VUCA WORLD
During this time when the world was increasingly becoming volatile, uncertain, complex, and ambiguous (VUCA), we said that it was important to “keep swimming,” otherwise we might end up worse than it would be.
Here we recommended that stakeholders apply the Effectuation Principles, which is an entrepreneurial process where the identification of the next best step by assessing the available resources to achieve the goals while continuously balancing these goals with the existing resources and actions. These principles are used by expert entrepreneurs to help them wrest control in an unpredictable environment. The five principles are as follows:
Bird-in-hand — start with what resources and means you have.
In unpredictable situations, rather than focusing on a goal, it is best to first assess the resources that are available and create a solution from there. These resources can be determined by asking, “who I am,” “what I know,” and “whom I know.” Once you are able to determine what resources you have, you may start to create ideas and solutions.
Affordable loss — the future is unpredictable, so know what you are comfortable losing.
In any new endeavor, there will always be risks. Instead of focusing on an expected return and working back to minimize the risks, it is best to understand how much you are willing to lose on each step. This will let you determine which endeavors you are willing to take knowing what you are risking and what there is to gain even if the result is unfavorable. This will limit your risks as you are already aware of what you may lose.
Lemonade — “When life throws you lemons, make lemonade.”
The pandemic was full of surprises and continues to be unpredictable. Despite the challenges and uncertainties, there are still plenty of opportunities around to be maximized. Instead of trying to control outcomes, it is best to take in these surprises and find a way to make these valuable. The current times also present “opportunities” for companies to find new ways of innovating (e.g., delivery and logistics services, telemedicine, teleconference platforms, etc.) These innovations will hopefully inspire more companies to be creative to sustain the economy.
Crazy quilt — work together with partners who are willing to cooperate and commit to the goal.
Having partners to work with you not only helps you achieve your goal, but also increases your means and resources. Of course, the goal may evolve as more ideas and resources are shared. It is still important to remember points 1 and 2, by knowing what you have and the risks you carry as partners. During the pandemic, it was more important to work together, communicate, create partnerships and leverage on key strengths with suppliers and clients.
Pilot in the plane — the future depends on the choices the pilot makes.
In an unpredictable environment, it is best to focus on the things that are within your control. It may be true that larger market forces determine how the future will play out, but it is also true that the future is shaped by the actions taken today.
In the same sense, inaction may also affect future outcomes or worse, result in further losses. Instead of allowing yourself to be thrown around by the unpredictability of the market, it is best to make sense of the current situation and figure out what can be done within your means.
With this paper series, our hope then was to encourage our clients and partners to continuously swim through the murky waters so as not to stagnate since, in our mind, inaction and paralysis could be worse for all of us.
So, when we were tallying the results of the first quarter performance of the office market, we were so glad to see that the office market occupancy has stabilized as Colliers recorded the net take-up to be positive.
Dom Fredrick Andaya is the senior director and head of Office Services, Tenant Representation, Colliers Philippines.