BPO sector to affect developers’ profitability

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Tessa R. Salazar

Philippine Daily Inquirer

2 February 2013

http://business.inquirer.net/105407/bpo-sector-to-affect-developers-profitability

BONIFACIO Global City is one of the top choices of BPO investors in the country

The office and residential segments this year will benefit from the thriving Business Process Outsourcing industry in the country, but large tenants would also mean a renegotiation of lease terms, which could impinge on developers’ profitability.

Enrique M. Soriano III, Ateneo program director for real estate and senior adviser for Wong+Bernstein Business Advisory, says the BPO industry, which has seen impressive growth in the last decade, will continue to fuel the demand for office space and even residential units, while remittances of overseas Filipinos would fuel demand in the low- to mid-range residential market.

Securing better deals

He adds that the influx of new companies and the expansion of existing ones have resulted in a much faster take-up of office space in central business districts.

The downside of this flourishing sector, he pointed out, is that “BPOs are large tenants that have more influence. They leverage their bigness by securing better deals, and in the process affect a developer’s profitability. Brokers are naturally part of the equation and will pursue the deal relentlessly. It’s time to expand the office development portfolio customized to local entrepreneurs.”

Claro dG Cordero Jr., Jones Lang LaSalle’s head of research, consulting and valuation, says the BPO/O&O (offshoring and outsourcing) industry would continue to be the major driver of office demand. The demand for office spaces will be coming mainly from expansion of existing operations and new entries from other high-value O&O services.

“We estimate office demand in 2013 to remain in the 400,000-(unit) level, and as historically suggested, approximately 60 percent of the figure will be coming from the BPO/O&O industry,” Cordero says.

Continue to rise

Colliers International, in its 10 predictions in the property sector, sees the BPO sector to continue to shine, driving the office market. It cited its research arm and the Business Process Association of the Philippines as its sources. BPAP indicates that BPO full-time employees (FTEs) will reach over 1 million by 2016 and will increase annually by 10 percent in the next four years. The number of new BPO FTEs for next year is estimated at 70,000 workers, leading to approximately 250,000 square meters of additional office space.

Rick Santos, CB Richard Ellis Philippines chair, founder and managing partner, says the Philippines is becoming the BPO banking hub of Asia. He adds that the office sector will continue to perform well in Asia Pacific, as it is one of the most cost-effective outsourcing destinations in the region.

CBRE Philippines says that “in the major business districts where office space requirements are on a steady uptake with no signs of a slowdown, demand is catching up with supply. Average occupancy rates during the first quarter hovered at 96 percent.”

CBRE Philippines notes that the demand from the sustained expansion of the O&O industry and the limited tenant turnover continue to put pressure on the already tight supply situation. It adds, “although new supplies of traditional and BPO office space are scheduled to come online in the second half of this year, it is not expected to do much to alleviate the supply situation. Already, of the approximately 583,000 sq m of anticipated new supply for 2013, about 130,000 sq m have been pre-committed as of end 2012. The limited supply continues to put an upward pressure on office lease rates.”

Energizer Philippines

Dear Rick,

I’d like to thank you and your team – Joey Radovan and Morgan Mcgilvray in particular, for the assistance given to us during our recent Office Relocation process.
They were very well organized and helpful:

- Our site visits were conducted in a very timely manner and my management committee received clear and useful guidance on various aspects related to site selection –from what to look for in terms of building services, location, etc., as well as guidance on the discussion etiquette they should observe in order to safeguard the confidentiality of issues that could be valuable at the time of final selection and negotiation of the site.

- Both assisted us in the selection of the Office Design and Construction supplier; they were present in all the presentations and gave us objective feedback and opinions that helped my team feel more educated and confident about the decisions they were making.

- We also received guidance with various topics that arouse secondary to our office relocation, such as off-site document storage options just to name one example.

- They continued their liaison and support with the landlord and constructors throughout the process of negotiating and signing the lease, as well as during a very tight construction and relocation schedule during which a lot little (important) issues arise that must be solved swiftly in order to keep the deadlines.

The above is by no means a comprehensive list, and I’d like to extend our thanks to your team who supported Joey and Morgan in giving us such excellent service.

We are now pretty much settled in without any business interruption and with our colleagues quite happy about our new office and location; do come to visit us when you get a chance!

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