Robust demand for BPO services seen

MANILA, Philippines—The local business process outsourcing sector is seen benefiting from the uncertainties in the American and European markets, as companies there scramble to outsource some of their business requirements to locations that provide quality service at lower costs.

According to Rick Santos, chairman of real estate consultancy firm CB Richard Ellis (CBRE) Philippines, the Philippines’ reputation as one of the leaders in the global business process outsourcing (BPO) industry was prompting businesses from the West, especially financial institutions, to come to the country to outsource.

This, in turn, has driven demand for additional office space, particularly in various business and BPO districts in Metro Manila, he said.

“The downturn and uncertainty in Europe and the US boosts BPO and offshoring demand for office space in the Philippines. US and European banks and financial institutions are accelerating expansion plans and offshoring, bolstering the office leasing market in the country,” he said in a briefing Wednesday.

CBRE Philippines executive director for research and consultancy Victor Asuncion said about 90-95 percent of office space take-up came from the BPO sector.

A recent study comparing 16 central business districts in Asia showed that Manila had the third-lowest lease rates for office space at an average of $19.10 per square foot per year, behind Jakarta’s $16.30 and New Delhi’s $12.70.

In terms of office rental yield, the Philippines ranked second in the third quarter at 10 percent, just a bit lower than India’s 11 percent.

CBRE Philippines associate director John Corpus said Metro Manila continued to corner the bulk of office space demand, as the majority of qualified employees for the BPO sector were still located there.

“Big developers are also positioning themselves in the provinces, but the demand is not that big yet. It’s getting there. In places like Cebu, where the labor and infrastructure are already established, the demand is big, but in tier-2 cities, not so much,” Corpus said in an interview.

CBRE Philippines director Joanie Mitchell added that many qualified BPO employees in tier-2 cities were still moving to bigger cities, including Metro Manila, to find jobs as the majority of BPO sites were there.

Santos said office space take-up in Manila should reach between 330,000 and 360,000 square meters this year.

“We see continued expansionary demand from multinational companies as there is good value in the Philippine real estate market,” he said.

Metro Manila currently has 3.6 million square meters of leasable area, more than a quarter of which, or one million square meters, can be found in Makati. Quezon City has 784,308 square meters of leasable space, while Taguig City, mostly within the Bonifacio Global City development, has 499,464 square meters.