Developers urged to look beyond BPO sector

PROPERTY developers should look beyond the business process outsourcing sector and start considering developing “middle office” hubs for financial institutions, said a property expert from global think tank Urban Land Institute (ULI).

While business process outsourcing has “created the buzz for the Philippines in the global property scene, it’s not enough to be a “one-trick pony,” said Simon Treacy—global trustee and chair of ULI South Asia and group chief executive officer at Singapore-based MGPA, a fund manager under the Macquarie Group.

ULI is a non-profit education and research institute focusing on land use.

In an interview during his recent visit to the Philippines, Singapore-based Treacy said that beyond BPO, property players must start looking at new growth areas.

“There are lots of opportunities. It may be home middle office on the professional side (as) cost among the banks is a major issue. We’ve seen that with UBS, Citibank etc.” Treacy said. “This could be a knowledge center for a lot of the financial services industries, why not?”

Middle office refers to the segment or division within a bank or financial service institution that takes care of risk management, calculates profits and losses and handles the information technology platform using the resources of “front” and “back” offices.

“Front” office usually refers to sales and corporate finance team while the back office, where BPOs come in, covers administrative and support services.

“I think the Philippines has a lot of talented people,” Treacy said.

Asked about the prospects for tourism-oriented property, another area where a lot of local developers are pouring money into, Treacy said the trend toward tourism was increasing. “And with the China-Japan issue (tension), you’ll probably see more tourism here, but every now and then you hear soundbytes about someone being kidnapped and from a foreign perspective, especially if you have kids, you want to go somewhere safe,” he said.

Industrial estate is one property segment in the country that has been lagging behind its counterparts overseas as the Philippine economy increasingly becomes service-oriented.

Treacy said the Philippines could go up the value chain in manufacturing and be able to lure back talented overseas Filipinos. He said this was what had been happening in China now “where there’s a big ‘U-turn’ of talents.” He was referring to the return of skilled manpower from overseas to China.

“As the Philippines goes investment grade in the next six months, this may probably happen here, too,” Treacy said. “You’ve got lots of Filipino doctors and nurses. Maybe this could be an education center for Asia.  The country has opportunities to spin off the BPO (story).”

Treacy also continued to hope that the property industry would find a way to work with regulators to introduce real estate investment trusts (REITs) in the country.

“Look at what Kuala Lumpur has done. It has increased transparency, liquidity, confidence. You’ve got banks now moving operations to KL. We’re now seeing Malaysia as a more institutional grade (property hub),” he said.

Based on a research published by ULI and PwC “Emerging Trends in Real Estate® 2013,” Manila ranked 12th out of 22 regional markets in terms of investment prospects and ninth in terms of development prospects, marking a rapid rise from near-bottom rankings in previous years’ polls.

Manila was ranked 18th in the outlook for 2012 and 20th two years before that.  This is the 7th edition of this trends and forecasts publication, which is based on the opinions of more than 400 internationally renowned real estate professionals, investors and other stakeholders.

Manila fared well in specific property segments, especially in the secondary or rental apartment residential segment, where it ranked second to Jakarta.  The ranking was based on the percentage of “buy” recommendations of survey respondents as opposed to “hold” or “sell.” Jakarta had a “buy” rating from 43.62 percent while Manila had 36.46 percent.