The Philippines is on its way to become a cost-effective hub for multinational companies (MNCs), according to global real estate consultancy company Cushman & Wakefield.
In its research paper titled “Should MNCs Stop Paying Rent Overseas?” published last August, Cushman & Wakefield noted that at present, many MNCs established their headquarters in China and India—especially pharmaceutical research and development (R&D) firms in the case of China, and mostly information technology-business process outsourcing (IT-BPO) companies in India.
Alongside robust economic growth in these two giant Asian countries, however, rental rates have risen in their respective central business districts (CBDs). That is why more and more international firms are now buying office space in peripheral regions outside CBDs to cut on costs, the report said.
As for American companies, they are switching from merely leasing space into buying offices in light of the United States’ corporate taxation policy, Cushman & Wakefield said.
“Corporate profits earned outside the US are not subject to federal taxes unless they are brought home. Several companies choose not to pay high taxes and are hence re-deploying profits earned in emerging markets into international operations. Some of these profits are likely being invested in real estate properties, which also offer significant returns,” it noted.
As the Philippine economy continues to grow, the country, as well as Vietnam, may soon join China and India as viable hosts of MNCs’ overseas operations, Cushman & Wakefield said.
“If China or India is the present, perhaps the Philippines is the future. The economic trajectory of the Philippines is nascent compared to India, and presents great opportunities for global giants,” it added.
“The country is an investment destination for global financial and insurance companies. Financial institutions such as Citibank and J.P. Morgan occupy large spreads in the Philippines, but they currently follow a rental strategy. However, just as the purchase of assets has became a reality in India only recently, this strategy may take hold in the Philippines after companies complete a few cycles of operation in that market and feel more confident about growing in the region,”
According to Sigrid Zialcita, Cushman & Wakefield managing director of research for Asia-Pacific, India, China and the Philippines are markets that offer attractive yields and prospects for good capital value appreciation.
“Companies stand to gain if they invest in these markets sooner rather than later to reap potential benefits,” she said.