Aside from rising interest rates, REIT investors are concerned about the long term viability of offices. But as the title says, offices are far from becoming extinct. They are, however, evolving. Check out this video from MREIT’s CEO, Kevin Tan, touring the offices of IBM in Eastwood. It shows us how the modern office is changing.

For shareholders of MREIT and other office REITs, the question we ask ourselves is whether their properties continue to attract tenants. There’s a few things to think about here. Firstly, is there even still a need for offices or can everyone work from home. The long term global trend seems to be that employees could spend around half their time in offices. This may lead to companies not requiring as much space as before but there will always be that need for an office where employees can collaborate, train, socialize or simply be more productive since not everyone has the best home office set up. If going to the office becomes optional, REITs with properties that are convenient to get to and hang around in will win – location, location, location.

The next thing we need to examine is the long term strength of the Philippines’ IT-BPO industry, the majority tenants of office REITs. The reasons that attract companies to set up teams in the country will remain true for some time. We have a young population with thousands of university graduates every year. The government continues to offer fiscal incentives to businesses that choose to set up here. The operational costs are much lower compared to other countries. It makes plenty of business sense for multinationals to have a base in the country. There will be sectors like POGOs who have fallen out of favor but the IT-BPO industry is huge and the Philippines will continue to take a big slice of that pie.

In the video, Kevin said that what he wants to focus on is the needs of the worker and I couldn’t agree more. The idea of working in an office is not dead. However, REIT landlords must continuously innovate what they are offering to attract people to their respective properties. If they do this successfully, then there will always be business locators who will willingly pay the rent year after year.