Demand for office space seen to remain strong

The sustained growth of the local outsourcing and offshoring industry is seen to fuel the continued strong demand in office space over the next two decades, according to property consultancy firm CBRE Philippines.

Rick M. Santos, CEO, chair and founder of CBRE Philippines, said the outlook for the office property sector remained “extremely positive” over the next 10 to 20 years, with lease demand (composed of renewals, new space leasing and preleasing) seen to grow to at least 850,000 square meters (sq m) by 2018. Current demand was estimated at about 600,000 sq m.

Of the 850,000 sq m, about 80 percent is expected to be taken up by business process outsourcing (BPO) companies from the United States, Europe and Australia as the country remained a favored investment destination. Driving this interest in the country as an investment destination would be its economic growth story, young demographics, skilled and English proficient labor pool, and competitive lease rates.

“The Philippine BPO sector will continue to thrive in the coming years. The country provides a conducive environment for foreign investors—an excellent pool and low cost of skilled labor, outstanding customer service, a quality destination, and one of the cheapest rental rates and highest yields in Asia,” Santos said.

“The Philippines is becoming the lifeboat for many US and European companies that need to outsource in order for their businesses to survive and actually preserve jobs back in the US and Europe,” he said.

Apart from new entrants in the local BPO space, existing companies that are beefing up their back office operations here are also boosting demand for office space. A number of outsourcing companies are also focusing more on precommitting space in anticipation of their programmed increase in the number of employees in the coming years, Santos added.

Santos said employment in the BPO industry was expected to continue its uptrend from about 1.3 million next year to 2.23 million by 2025, and 3.3 million by 2035.

Jan Paul Custodio, a senior director at CBRE Philippines, meanwhile pointed out that the revenue growth in the BPO industry was also expected to sustain a strong double digit growth of about 15 percent beyond 2016, surpassing the growth rate of OFW remittances.

Last year, BPO revenue grew by 18.7 percent while OFW remittances rose by only 6 percent.

The Philippines offers alternative locations or the so-called next wave cities for BPO companies. These include Clark, Cavite, Iloilo, Bacolod, Cebu, Davao, Cagayan de Oro, Laguna and Baguio.