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Real estate industry rides on boom in BPO sector

Vacancy rates on the decline

By Abigail L. Ho
Philippine Daily Inquirer
First Posted 21:57:00 03/13/2011

Filed Under: Real Estate, Construction & Property, business process outsourcing (BPO)

MANILA, Philippines?The real estate sector continues to be one of the biggest beneficiaries of the boom in the business process outsourcing sector, as vacancy rates drop and the need to construct more office, and even residential, spaces increases.

In an interview with the Inquirer, David Young, managing director of real estate services provider Colliers International in the Philippines, said the BPO sector?s aim to add another 500,000 to its employee base over the next five years translated to the need to build close to 3 million square meters of office space.

?This industry, on its own, can fill up all office space in Ortigas. Real estate developers have a lot to thank this industry for, as it has spurred not just commercial development but residential development as well. BPO employees are either getting their own or leasing condo units,? he said.

He said the surge in the number of BPO employees, many of whom had to work outside their hometowns, had given rise to the establishment of condominium buildings with studio and one-bedroom units that are well suited to these individuals.

Mall developers have also cashed in on the BPO trend, he said, by constructing buildings with more floors and leasing the top stories to BPO companies.

Developers of office spaces reaped the most benefit from the surge in BPO activities, as opportunities opened for them to move into suburban areas and the province, away from the already crowded Makati and Ortigas business districts, he said.

?Makati and Ortigas are not really suited for BPO operations. Also, the vacancy rate in Makati is down to just 4 percent and in Ortigas to only 6 percent, with no more room to grow. The movement is toward suburban areas like Eastwood and the (University of the Philippines-Ayala Land TechnoHub), as well as to the Fort (in Taguig),? he said.

Rates have also started to pick up. He related that office space in Makati would cost around P750 per square meter for prime buildings such as 6750, RCBC and Ayala Tower One. The rate is P100 per square meter cheaper in Ortigas at P650 for buildings such as Wynsum and Orient Square. In Alabang, Eastwood, and UP, lease rates range from P400 to P500 a square meter.

As vacancies go down and rates go up, Gregory Kittelson, chairman of real estate brokerage firm KMC MAG Group, advised BPO firms, particularly start-ups and small and medium operators, to try the serviced offices approach.

?Developers are building large offices to be leased to large companies, but some companies are also looking for small spaces, especially when they?re starting out,? he said in a separate interview. ?There?s a massive need for serviced offices that can serve as incubation spaces for start-ups or as temporary offices for expanding small and medium BPO firms. These serviced offices can cater to operations with 5-100 seats.?

He said KMC MAG Group last year assisted more than 100 companies in setting up shop here using the serviced offices approach. Around 50-60 percent of these companies were from the BPO sector.

?There?s not enough temporary office spaces now. All we have are big offices. This is an opportunity for developers as well,? he said.



Copyright 2014 Philippine Daily Inquirer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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