Developers urged to diversify tenant mix

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PROPERTY developers should diversity their tenant mix and not just rely on the business process outsourcing (BPO) industry to guard against the risk of a sudden drop in rental income, a local real estate consultancy firm said.

“A good tenant mix in your building can lessen the risk of sudden drop in your rental income in case of recession or economic meltdown,” Prime Philippines managing director Jet Yu said during a real estate forum on Friday.

Yu noted that office buildings in the country are not solely dependent on the BPO industry in terms of occupancy.

“This means that should the BPO market slow down or downsize, there will be other companies that will absorb these office spaces,” he said.


Yu cited the case of Quezon City where in the BPO industry, along with the information technology sector, only accounted for 31 percent of the demand for office spaces in the city in 2015.

There was also substantial demand from the government sector which took up 6.47 percent of the office space demand in Quezon City last year, he said.

“Some of these government agencies have requirements that would range from 2,000 square meters to up to 10,000 square meters. It would take up already one whole building,” Yu said.

He said that the general and professional services sector comprised 23.84 percent of office space demand while other sectors — finance, manufacturing, real estate and healthcare — accounted for 38.53 percent.

“I know it’s more convenient and it’s easier to lease out one whole building to one tenant but in a case of applying a good tenant mix, if a specific industry would collapse, you would not lose 100 percent of your previous rental count. Although it’s not a guarantee but it will lessen the risk of leaving you with high vacancy rate,” the realty consultant explained.

He said high vacancy rates would result in higher expenses for landlords as they would have to shoulder the maintenance costs of the office space that is not leased out.

There are preventive measures to lessen the risk of tenants backing out from their lease, he said.

“This can be avoided through proper assessment, tenant planning and thorough study before launching the project or while the building is still under construction. This way, you will be able to set the right path, the right direction on which tenant you should choose for a building,” Yu concluded.

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